TABLE OF CONTENTS
			Page
PART I.	FINANCIAL STATEMENTS		~~(to be updated)~~

	Item 1.	Consolidated Financial Statements (Unaudited)

		Consolidated Statements of Financial Condition as of June 30, ~~2021~~2022 and December 31, ~~2020~~2021	1

		Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and six months ended June 30, ~~2021~~2022 and ~~2020~~2021	2

		Consolidated Statements of Cash Flows for the six months ended June 30, ~~2021~~2022 and ~~2020~~2021	3

		Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, ~~2021~~2022 and ~~2020~~2021	4

		Notes to Consolidated Financial Statements	6

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29 26

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40 39

	Item 4.	Controls and Procedures	4039

PART II.	OTHER INFORMATION

	Item 1.	Legal Proceedings	42 40

	Item 1A.	Risk Factors	4240

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4240

	Item 3.	Defaults Upon Senior Securities	4240

	Item 4.	Mine Safety Disclosures	4240

	Item 5.	Other Information	4240

	Item 6.	Exhibits	4240

	Signatures		43 41

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Consolidated Statements of Financial Condition

(In thousands, except share and per share amounts)

	June 30, 2021			December 31, 2020			June 30, 2022			December 31, 2021
	(Unaudited)						(Unaudited)
Assets:
Cash and due from banks	$	41,730		$	71,110		$	37,919		$	38,418
Interest-bearing deposits in other banks		168,653			24,999			242,218			193,102
Cash and cash equivalents		210,383			96,109			280,137			231,520
Securities available-for-sale, at fair value		158,832			10,698			238,298			156,396
Loans receivable held for investment, net of allowance of $3,296 and $3,215		614,718			360,129
Loans receivable held for investment, net of allowance of $2,962 and $3,391								646,868			648,513
Accrued interest receivable		2,572			1,202			2,694			3,372
Federal Home Loan Bank (FHLB) stock		2,896			3,431			1,470			2,573
Federal Reserve Bank (FRB) stock		693			0			693			693
Office properties and equipment, net		9,159			2,540			10,354			10,344
Bank owned life insurance		3,168			3,147			3,211			3,190
Deferred tax assets, net		5,513			5,633			9,012			6,101
Core deposit intangible, net		3,198			0			2,719			2,936
Goodwill		25,996			0			25,858			25,996
Other assets		3,870			489			2,910			1,871
Total assets	$	1,040,998		$	483,378		$	1,224,224		$	1,093,505

Liabilities and stockholders’ equity
Liabilities:
Deposits	$	705,041		$	315,630		$	816,177		$	788,052
Securities sold under agreements to repurchase		70,660			0			67,292			51,960
FHLB advances		96,022			110,500			32,932			85,952
Junior subordinated debentures		2,805			3,315
Notes payable		14,000			0			14,000			14,000
Accrued expenses and other liabilities		8,975			5,048			9,066			12,441
Total liabilities		897,503			434,493			939,467			952,405
Cumulative Redeemable Perpetual Preferred stock, Series A, authorized 3,000 shares at June 30, 2021 and NaN at December 31, 2020; issued and outstanding 3,000 shares at June 30, 2021 and NaN at December 31, 2020, liquidation value $1,000 per share		3,000			0
Common stock, Class A, $0.01 par value, voting, authorized 75,000,000 shares at June 30, 2021 and 50,000,000 shares at December 31, 2020; issued 46,248,710 shares at June 30, 2021 and 21,899,584 shares at December 31, 2020; outstanding 43,630,884 shares at June 30, 2021 and 19,281,758 shares at December 31, 2020		462			219
Common stock, Class B, $0.01 par value, non-voting, authorized 15,000,000 shares at June 30, 2021 and 0ne at December 31, 2020; issued and outstanding 11,404,621 shares at June 30, 2021 and 0ne at December 31, 2020		114			0
Common stock, Class C, $0.01 par value, non-voting, authorized 25,000,000 shares at June 30, 2021 and December 31, 2020; issued and outstanding 16,689,775 at June 30, 2021 and 8,756,396 shares at December 31, 2020		167			87
Cumulative Perpetual Preferred stock, Series A; authorized 3,000 shares at June 30, 2022 and December 31, 2021; issued and outstanding 0 shares at June 30, 2022 and 3,000 at December 31, 2021; liquidation value $1,000 per share								0			3,000
Non-Cumulative Redeemable Perpetual Preferred stock, Series C; authorized 150,000 shares at June 30, 2022 and 0 shares as of December 31, 2021; issued and outstanding 150,000 shares at June 30, 2022 and 0 shares at December 31, 2021; liquidation value $1,000 per share								150,000			0
Common stock, Class A, $0.01 par value, voting; authorized 75,000,000 shares at June 30, 2022 and December 31, 2021; issued 50,438,555 shares at June 30, 2022 and 46,291,852 shares at December 31, 2021; outstanding 47,820,729 shares at June 30, 2022 and 43,674,026 shares at December 31, 2021								504			463
Common stock, Class B, $0.01 par value, non-voting; authorized 15,000,000 shares at June 30, 2022 and December 31, 2021; issued and outstanding 11,404,618 shares at June 30, 2022 and December 31, 2021								114			114
Common stock, Class C, $0.01 par value, non-voting; authorized 25,000,000 shares at June 30, 2022 and December 31, 2021; issued and outstanding 14,258,735 at June 30, 2022 and 16,689,775 shares at December 31, 2021								143			167
Additional paid-in capital		140,125			46,851			143,427			140,289
Retained earnings		4,997			7,783			6,470			3,673
Unearned Employee Stock Ownership Plan (ESOP) shares		(861	)		(893	)		(797	)		(829	)
Accumulated other comprehensive income, net of tax		785			164
Treasury stock-at cost, 2,617,826 shares at June 30, 2021 and at December 31, 2020		(5,326	)		(5,326	)
Accumulated other comprehensive loss, net of tax								(9,901	)		(551	)
Treasury stock-at cost, 2,617,826 shares at June 30, 2022 and at December 31, 2021								(5,326	)		(5,326	)
Total Broadway Financial Corporation and Subsidiary stockholders’ equity		143,463			48,885			284,634			141,000
Non-controlling interest		32			0			123			100
Total liabilities and stockholders’ equity	$	1,040,998		$	483,378		$	1,224,224		$	1,093,505

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Consolidated Statements of Operations and Comprehensive Income (Loss)

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended June 30,					Six Months Ended June 30,
	2022			2021		2022			2021

Interest income:
Interest and fees on loans receivable	$	6,879		$	6,300	$	14,083		$	9,944
Interest on available-for-sale securities		834			440		1,425			496
Other interest income		788			144		872			221
Total interest income		8,501			6,884		16,380			10,661

Interest expense:
Interest on deposits		349			477		699			860
Interest on borrowings		114			586		471			1,135
Total interest expense		463			1,063		1,170			1,995

Net interest income		8,038			5,821		15,210			8,666
Loan loss provision (recapture)		(577	)		81		(429	)		81
Net interest income after loan loss provision (recapture)		8,615			5,740		15,639			8,585

Non-interest income:
Service charges		21			36		85			129
CDFI Grant		0			1,826		0			1,826
Other		240			330		457			360
Total non-interest income		261			2,192		542			2,315

Non-interest expense:
Compensation and benefits		3,307			2,819		6,926			8,209
Occupancy expense		400			627		842			935
Information services		767			566		1,632			807
Professional services		958			513		1,322			2,452
Supervisory costs		62			177		115			247
Office services and supplies		100			59		257			154
Corporate insurance		54			8		115			254
Amortization of core deposit intangible		108			131		217			131
Other		510			474		800			812
Total non-interest expense		6,266			5,374		12,226			14,001

Income (loss) before income taxes		2,610			2,558		3,955			(3,101	)
Income tax expense (benefit)		757			1,824		1,120			(348	)
Net income (loss)	$	1,853		$	734	$	2,835		$	(2,753	)
Less: Net income (loss) attributable to non-controlling interest		(1	)		33		23			33
Net income (loss) attributable to Broadway Financial Corporation	$	1,854		$	701	$	2,812		$	(2,786	)

Other comprehensive income, net of tax:
Unrealized gains (losses) on securities available-for-sale arising during the period	$	(5,178	)	$	1,022	$	(13,332	)	$	864
Income tax (benefit) expense		(1,675	)		290		(3,982	)		243
Other comprehensive income (loss), net of tax		(3,503	)		732		(9,350	)		621

Comprehensive income (loss)	$	(1,649	)	$	1,433	$	(6,538	)	$	(2,165	)

Earnings (loss) per common share-basic	$	0.03		$	0.01	$	0.04		$	(0.06	)
Earnings (loss) per common share-diluted	$	0.03		$	0.01	$	0.04		$	(0.06	)

See accompanying notes to unaudited consolidated financial statements.

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BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Consolidated Statements of Cash Flows

(Unaudited)

Three Months Ended
June 30,

Six Months Ended
June 30,

2021
2020
2021
2020

(In thousands, except per share)

Interest income:
Interest and fees on loans receivable $ 6,300 $ 4,429 $ 9,944 $ 8,788
Interest on available for sale securities 440 65 496 135
Other interest income 144 74 221 216
Total interest income 6,884 4,568 10,661 9,139

Interest expense:
Interest on deposits 477 967 860 2,022
Interest on borrowings 586 570 1,135 1,188
Total interest expense 1,063 1,537 1,995 3,210

Net interest income 5,821 3,031 8,666 5,929
Loan loss provision
81 0 81 29
Net interest income after loan loss provision 5,740 3,031 8,585 5,900

Non-interest income:
Service charges 36 94 129 238
Gain on sale of loans 0 116 0 123
CDFI Grant 1,826 0 1,826 0
Other 330 32 360 78
Total non-interest income 2,192 242 2,315 439

Non-interest expense:
Compensation and benefits 2,819 1,983 8,209 4,038
Occupancy expense 627 320 935 635
Information services 566 221 807 458
Professional services 513 571 2,452 835
Supervisory costs
177 95 247 112
Office services and supplies 59 87 154 163
Corporate insurance 8 32 254 64
Amortization of core deposit intangible 131 0 131 0
Other 474 93 812 246
Total non-interest expense 5,374 3,402 14,001 6,551

Income (loss) before income taxes 2,558 (129 ) (3,101 ) (212 )
Income tax expense (benefit) 1,824 (345 ) (348 ) (395 )
Net income (loss) $ 734 $ 216 $ (2,753 ) $ 183
Less: Net income attributable to non-controlling interest
(33 ) 0 (33 ) 0
Net Income (loss) Attributable to Broadway Financial Corporation
$
701 $
216 $
(2,786 ) $
183

Other comprehensive income, net of tax:
Unrealized gains on securities available-for-sale arising during the period $ 1,022 $ 155 $ 864 $ 330
Income tax expense 290 46 243 98
Other comprehensive income, net of tax 732 109 621 232

Comprehensive income (loss) $ 1,433 $ 325 $ (2,165 ) $ 415

Earnings (loss) per common share-basic $ 0.01
$
0.01
$ (0.06 ) $ 0.01
Earnings (loss) per common share-diluted $ 0.01 $ 0.01 $ (0.06 ) $ 0.01

	Six Months Ended June 30,
	2022			2021
	(In thousands)
Cash flows from operating activities:
Net income (loss)	$	2,835		$	(2,753	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Loan loss (recapture) provision		(429	)		81
Depreciation		573			345
Net change in amortization of deferred loan origination costs		(376	)		964
Net amortization of premiums on available-for-sale securities		192			231
Amortization of investment in affordable housing limited partnership		0			26
Amortization of purchase accounting marks on loans		(990	)		0
Amortization of core deposit intangible		217			131
Director compensation expense-common stock		84			45
Accretion of premium on FHLB advances		(20	)		(7	)
Stock-based compensation expense		58			169
Valuation allowance on deferred tax asset		0			370
ESOP compensation expense		45			47
Change in deferred taxes on goodwill		138			0
Earnings on bank owned life insurance		(21	)		(21	)
Change in assets and liabilities:
Net change in deferred taxes		1,071			(1,210	)
Net change in accrued interest receivable		678			267
Net change in other assets		(1,039	)		(1,118	)
Net change in accrued expenses and other liabilities		(3,375	)		(137	)
Net cash used in operating activities		(359	)		(2,570	)

Cash flows from investing activities:
Cash acquired in merger		0			84,745
Net change in loans receivable held for investment		3,440			(29,749	)
Principal payments on available-for-sale securities		9,231			6,547
Purchase of available-for-sale securities		(104,657	)		(4,073	)
Purchase of FHLB stock		(328	)		(152	)
Proceeds from redemption of FHLB stock		1,431			1,055
Purchase of office properties and equipment		(583	)		(56	)
Proceeds from disposals of office properties and equipment		0			45
Net cash (used in) provided by investing activities		(91,466	)		58,362

Cash flows from financing activities:
Net change in deposits		28,125			35,690
Net increase in securities sold under agreements to repurchase		15,332			10,613
Proceeds from sale of stock (net of costs)		0			30,837
Proceeds from issuance of preferred stock		150,000			0
Dividends paid on preferred stock		(15	)		0
Distributions to non-controlling interest		0			(165	)
Proceeds from FHLB advances		0			5,000
Repayments of FHLB advances		(53,000	)		(22,535	)
Stock cancelled for income tax withholding		0			(448	)
Repayments of junior subordinated debentures		0			(510	)
Net cash provided by financing activities		140,442			58,482
Net change in cash and cash equivalents		48,617			114,274
Cash and cash equivalents at beginning of the period		231,520			96,109
Cash and cash equivalents at end of the period	$	280,137		$	210,383

Supplemental disclosures of cash flow information:
Cash paid for interest	$	1,378		$	1,803
Cash paid for income taxes		0			429
Assets acquired (liabilities assumed) in acquisition:
Securities available-for-sale, at fair value	$	0		$	149,975
Loans receivable		0			225,885
Accrued interest receivable		0			1,637
FHLB and FRB stock		0			1,061
Office property and equipment		0			6,953
Goodwill		0			25,966
Core deposit intangible		0			3,329
Other assets		0			2,290
Deposits		0			(353,722	)
FHLB advances		0			(3,166	)
Securities sold under agreements to repurchase		0			(59,945	)
Other borrowings		0			(14,000	)
Deferred taxes		0			(717	)
Accrued expenses and other liabilities		0			(4,063	)
Preferred stock		0			(3,000	)
Common stock		0			(63,257	)

See accompanying notes to unaudited consolidated financial statements.

~~Table of Contents~~

~~BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY~~

~~Consolidated Statements of~~ ~~Cash Flows~~

~~(Unaudited)~~

Six Months Ended June 30,
2021
2020

(In thousands)
Cash flows from operating activities:

Net (loss) income
$
(2,753
)

$
183

Adjustments to reconcile net income to net cash used in operating activities:
Loan loss provision

81

29

Depreciation
345

115

Net amortization of deferred loan origination costs
964

136

Net amortization of premiums on available for sale securities
231

19

Amortization of investment in affordable housing limited partnership
26
53

Amortization of core deposit intangible
131 0
Director compensation expense-common stock
45

45

Accretion of premium on FHLB advances (7 ) 0
Stock-based compensation expense
169

179

Valuation allowance on deferred tax asset
370 0
ESOP compensation expense
47

32

Earnings on bank owned life insurance
(21
)

(23
)
Originations of loans receivable held for sale
0

(110,908
)
Proceeds from sales of loans receivable held for sale
0

60,997

Repayments on loans receivable held for sale
0
315

Gain on sale of loans receivable held for sale
0

(123
)
Change in assets and liabilities:
Net change in deferred taxes
(1,210
)

(271
)
Net change in accrued interest receivable
267

(68
)
Net change in other assets
(1,118
)

(349
)
Net change in advance payments by borrowers for taxes and insurance
310

43

Net change in accrued expenses and other liabilities
(447
)

442

Net cash used in operating activities
(2,570
)

(49,154
)

Cash flows from investing activities:
Cash acquired in merger
84,745 0
Net change in loans receivable held for investment
(29,749
)

23,265

Principal payments on available-for-sale securities
6,547

1,125

Purchase of available-for-sale securities
(4,073 ) 0

Purchase of FHLB stock
(152
)

(670
)
Proceeds from redemption of FHLB stock
1,055
0

Purchase of office properties and equipment
(56
)

(328
)
Proceeds from disposals of office property and equipment 45 0
Net cash provided by investing activities
58,362

23,392

Cash flows from financing activities:
Net change in deposits
35,690

18,054

Net increase in securities sold under agreements to repurchase
10,613 0
Proceeds from sale of stock (net of costs) 30,837 0
Distributions to non-controlling interest (165 ) 0
Proceeds from FHLB advances
5,000

66,000

Repayments of FHLB advances
(22,535
)

(33,500
)
Stock cancelled for income tax withholding
(448 ) 0
Repayments of junior subordinated debentures
(510
)

(510
)
Net cash provided by financing activities
58,482

50,044

Net change in cash and cash equivalents
114,274

24,282

Cash and cash equivalents at beginning of the period
96,109

15,566

Cash and cash equivalents at end of the period
$
210,383

$
39,848

Supplemental disclosures of cash flow information:
Cash paid for interest
$
1,803

$
3,290

Cash paid for income taxes
429

3

Assets acquired (liabilities assumed) in acquisition:

Securities available for sale, at fair value
$ 149,975 $ 0
Loans receivable
225,885
0

Accrued interest receivable
1,637
0

FHLB and FRB stock
1,061
0

Office property and equipment
6,953
0

Goodwill
25,966
0

Core deposit intangible 3,329 0
Other assets 2,290 0
Deposits (353,722 ) 0
FHLB advances (3,166 ) 0
Securities sold under agreements to repurchase (59,945 ) 0
Other borrowings (14,000 ) 0
Deferred taxes (717 ) 0
Accrued expenses and other liabilities (4,063 ) 0
Preferred stock (3,000 ) 0
Common stock (63,257 ) 0

~~See accompanying notes to unaudited consolidated financial statements.~~

Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Consolidated S~~tatements~~Statements of Changes in Stockholders’ Equity

(Unaudited)

																										Three-Month Period Ended June 30, 2022 and 2021
			Three-Month Period Ended June 30, 2021 and 2020																							Preferred Stock Non-Voting		Common Stock Voting			Common Stock Non-Voting			Additional Paid‑in Capital		Accumulated Other Comprehensive Income			Retained Earnings		Unearned ESOP Shares			Treasury Stock			Non-Controlling Interest			Total Stockholders’ Equity
	Preferred Stock Non-Voting		Common Stock Voting			Common Stock Non-Voting		Additional Paid‑in Capital		Accumulated Other Comprehensive Income		Retained Earnings (Substantially Restricted)		Unearned ESOP Shares			Treasury Stock			Non-controlling Interest			Total Stockholders’ Equity			(In thousands)
Balance at April 1, 2022																										$	0	$	489		$	272		$	143,373	$	(6,398	)	$	4,616	$	(813	)	$	(5,326	)	$	124		$	136,337
Net income for the three months ended June 30, 2022																											0		0			0			0		0			1,854		0			0			(1	)		1,853
Preferred shares issued																											150,000		0			0			0		0			0		0			0			0			150,000
Release of unearned ESOP shares																											0		0			0			11		0			0		16			0			0			27
Restricted stock compensation expense																											0		0			0			43		0			0		0			0			0			43
Conversion of non-voting shares into voting shares																											0		15			(15	)		0		0			0		0			0			0			0
Other comprehensive loss, net of tax																											0		0			0			0		(3,503	)		0		0			0			0			(3,503	)
Balance at June 30, 2022																										$	150,000	$	504		$	257		$	143,427	$	(9,901	)	$	6,470	$	(797	)	$	(5,326	)	$	123		$	284,757
										(In thousands)
Balance at March 31, 2021	$	0	$	218		$	87	$	46,625	$	53	$	4,296	$	(877	)	$	(5,326	)	$	0		$	45,076
Balance at April 1, 2021																										$	0	$	218		$	87		$	46,625	$	53		$	4,296	$	(877	)	$	(5,326	)	$	0		$	45,076
Net income for the three months ended June 30, 2021		0		0			0		0		0		701		0			0			33			734			0		0			0			0		0			701		0			0			33			734
Preferred shares issued in business combination		3,000		0			0		0		0		0		0			0			0			3,000			3,000		0			0			0		0			0		0			0			0			3,000
Common shares issued in business combination		0		140			114		62,839		0		0		0			0			164			63,257			0		140			114			62,839		0			0		0			0			164			63,257
Shares transferred from voting to non-voting after business combination		0		(7	)		7		0		0		0		0			0			0			0			0		(7	)		7			0		0			0		0			0			0			0
Common shares issued in private placement		0		112			73		30,652		0		0		0			0			0			30,837			0		112			73			30,652		0			0		0			0			0			30,837
Release of unearned ESOP shares		0		0			0		9		0		0		16			0			0			25			0		0			0			9		0			0		16			0			0			25
Common stock cancelled for payment of tax withholdings		0		(1	)		0		0		0		0		0			0			0			(1	)
Common stock cancelled for payment of tax withholding																											0		(1	)		0			0		0			0		0			0			0			(1	)
Payment to non-controlling interest		0		0			0		0		0		0		0			0			(165	)		(165	)		0		0			0			0		0			0		0			0			(165	)		(165	)
Other comprehensive income, net of tax		0		0			0		0		732		0		0			0			0			732			0		0			0			0		732			0		0			0			0			732
Balance at June 30, 2021	$	3,000	$	462		$	281	$	140,125	$	785	$	4,997	$	(861	)	$	(5,326	)	$	32		$	143,495		$	3,000	$	462		$	281		$	140,125	$	785		$	4,997	$	(861	)	$	(5,326	)	$	32		$	143,495

Balance at March 31, 2020	$	0	$	219		$	87	$	46,550	$	100	$	8,392	$	(942	)	$	(5,326	)	$	0		$	49,080
Net income for the three months ended June 30, 2020		0		0			0		0		0		216		0			0			0			216
Release of unearned ESOP shares		0		0			0		0		0		0		15			0			0			15
Restricted stock Compensation expense		0		0			0		90		0		0		0			0			0			90
Stock option compensation expense		0		0			0		10		0		0		0			0			0			10
Other comprehensive income, net of tax		0		0			0		0		109		0		0			0			0			109
Balance at June 30, 2020	$	0	$	219		$	87	$	46,650	$	209	$	8,608	$	(927	)	$	(5,326	)	$	0		$	49,520

See accompanying notes to unaudited consolidated financial statements.

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			Six-Month Period Ended June 30, 2021 and 2020																										Six-Month Period Ended June 30, 2022 and 2021
	Preferred Stock Non-Voting		Common Stock Voting			Common Stock Non-Voting		Additional Paid‑in Capital			Accumulated Other Comprehensive Income			Retained Earnings (Substantially Restricted)			Unearned ESOP Shares			Treasury Stock			Non-controlling interest			Total Stockholders’ Equity			Preferred Stock Non-Voting			Common Stock Voting			Common Stock Non-Voting			Additional Paid‑in Capital			Accumulated Other Comprehensive Income			Retained Earnings			Unearned ESOP Shares			Treasury Stock			Non-Controlling Interest			Total Stockholders’ Equity
																													(In thousands)
Balance at January 1, 2022																													$	3,000		$	463		$	281		$	140,289		$	(551	)	$	3,673		$	(829	)	$	(5,326	)	$	100		$	141,100
Net income for the six months ended June 30, 2022																														0			0			0			0			0			2,812			0			0			23			2,835
Preferred shares issued																														150,000			0			0			0			0			0			0			0			0			150,000
Release of unearned ESOP shares																														0			0			0			13			0			0			32			0			0			45
Restricted stock compensation expense																														0			5			0			53			0			0			0			0			0			58
Stock awarded to directors																														0			0			0			84			0			0			0			0			0			84
Conversion of preferred shares to common shares																														(3,000	)		12			0			2,988			0			0			0			0			0			0
Conversion of non-voting shares into voting shares																														0			24			(24	)		0			0			0			0			0			0			0
Dividends paid on preferred stock																														0			0			0			0			0			(15	)		0			0			0			(15	)
Other comprehensive loss, net of tax																														0			0			0			0			(9,350	)		0			0			0			0			(9,350	)
Balance at June 30, 2022																													$	150,000		$	504		$	257		$	143,427		$	(9,901	)	$	6,470		$	(797	)	$	(5,326	)	$	123		$	284,757
											(In thousands)
Balance at January 1, 2021	$	0	$	219		$	87	$	46,851		$	164		$	7,783		$	(893	)	$	(5,326	)	$	0		$	48,885		$	0		$	219		$	87		$	46,851		$	164		$	7,783		$	(893	)	$	(5,326	)	$	0		$	48,885
Net income (loss) for the six months ended June 30, 2021		0		0			0		0			0			(2,786	)		0			0			33			(2,753	)		0			0			0			0			0			(2,786	)		0			0			33			(2,753	)
Preferred shares issued in business combination		3,000		0			0		0			0			0			0			0			0			3,000			3,000			0			0			0			0			0			0			0			0			3,000
Common shares issued in business combination		0		140			114		62,839			0			0			0			0			164			63,257			0			140			114			62,839			0			0			0			0			164			63,257
Shares transferred from voting to non-voting after business combination		0		(7	)		7		0			0			0			0			0			0			0			0			(7	)		7			0			0			0			0			0			0			0
Common shares issued in private placement		0		112			73		30,652			0			0			0			0			0			30,837			0			112			73			30,652			0			0			0			0			0			30,837
Release of unearned ESOP shares		0		0			0		15			0			0			32			0			0			47			0			0			0			15			0			0			32			0			0			47
Restricted stock compensation expense		0		0			0		162			0			0			0			0			0			162			0			0			0			162			0			0			0			0			0			162
Stock awarded to directors		0		0			0		45			0			0			0			0			0			45			0			0			0			45			0			0			0			0			0			45
Stock option compensation expense		0		0			0		7			0			0			0			0			0			7			0			0			0			7			0			0			0			0			0			7
Common stock cancelled for payment of tax withholdings		0		(2	)		0		(446	)		0			0			0			0			0			(448	)
Common stock cancelled for payment of tax withholding																														0			(2	)		0			(446	)		0			0			0			0			0			(448	)
Payment to non-controlling interest		0		0			0		0			0			0			0			0			(165	)		(165	)		0			0			0			0			0			0			0			0			(165	)		(165	)
Other comprehensive income, net of tax		0		0			0		0			621			0			0			0			0			621			0			0			0			0			621			0			0			0			0			621
Balance at June 30, 2021	$	3,000	$	462		$	281	$	140,125		$	785		$	4,997		$	(861	)	$	(5,326	)	$	32		$	143,495		$	3,000		$	462		$	281		$	140,125		$	785		$	4,997		$	(861	)	$	(5,326	)	$	32		$	143,495

Balance at January 1, 2020	$	0	$	218		$	87	$	46,426		$	(23	)	$	8,425		$	(959	)	$	(5,326	)	$	0		$	48,848
Net income for the six months ended June 30, 2020		0		0			0		0			0			183			0			0			0			183
Release of unearned ESOP shares		0		0			0		0			0			0			32			0			0			32
Restricted stock compensation expense		0		1			0		160			0			0			0			0			0			161
Stock awarded to directors		0		0			0		45			0			0			0			0			0			45
Stock option compensation expense		0		0			0		19			0			0			0			0			0			19
Other comprehensive loss, net of tax		0		0			0		0			232			0			0			0			0			232
Balance at June 30, 2020	$	0	$	219		$	87	$	46,650		$	209		$	8,608		$	(927	)	$	(5,326	)	$	0		$	49,520

See accompanying notes to unaudited consolidated financial statements.

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BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements

NOTE (1) – Basis of Financial Statement Presentation

The accompanying unaudited consolidated financial statements include Broadway Financial Corporation (the “Company”) and its wholly owned subsidiary, City First Bank, National Association (the “Bank” and, together with the Company, “City First Broadway”). Also included in the unaudited consolidated financial statements are the following subsidiaries of City First Bank: 1432 U Street LLC, Broadway Service Corporation, City First Real Estate LLC, City First Real Estate II LLC, City First Real Estate III LLC, City First Real Estate IV LLC, and CF New Markets Advisors, LLC (“CFNMA”). In addition, CFNMA also consolidates CFC Fund Manager II, LLC; City First New Markets Fund II, LLC; City First Capital IX, LLC; and City First Capital 45, LLC (“CFC 45”) into its financial results. ~~The results of Broadway Service Corporation, a wholly owned subsidiary of the Bank, are also included in the unaudited consolidated financial statements.~~ All significant intercompany balances and transactions have been eliminated in consolidation.

The unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions for quarterly reports on Form 10-Q. These unaudited consolidated financial statements do not include all disclosures associated with the Company’s consolidated annual financial statements included in its Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 (“~~2020~~2021 Form 10-K”) and, accordingly, should be read in conjunction with such audited consolidated financial statements. In the opinion of management, all adjustments (all of which are normal and recurring in nature) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, ~~2021~~2022 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2021.~~
2022.

Subsequent events have been evaluated through August ~~23, 2021,~~15, 2022, which is the date these financial statements were issued.

Except as discussed below, our accounting policies are described in Note 1 – Summary of Significant Accounting Policies of our audited consolidated financial statements included in ~~(the “2020~~the 2021 Form ~~10-K”).~~10-K.

~~Purchased Credit Impaired Loans~~

As part our recent merger, see Note 2 – Business Combination, the Company acquired certain loans that have shown evidence of credit deterioration since origination; these loans are referred to as purchased credit impaired loans (“PCI loans”). These PCI loans are recorded at their fair value at acquisition, such that there is no carryover of the seller’s allowance for loan losses. Such PCI loans are accounted for individually. The Company estimates the amount and timing of expected cash flows for each PCI loan, and the expected cash flows in excess of the allocated fair value is recorded as interest income over the remaining life of the loan (accretable yield). The excess of the loan’s contractual principal and interest over expected cash flows is not recorded (non-accretable difference). Over the life of the PCI loan, expected cash flows continue to be estimated each quarter. If the present value of expected cash flows decreases from the prior estimate, a provision for loan losses is recorded and an allowance for loan losses is established. If the present value of expected cash flows increases from the prior estimate, the increase is recognized as part of future interest income. If the timing and amount of cash flows is uncertain, then cash payments received will be recognized as a reduction of the recorded investment.

~~Business Combinations~~

Business combinations are accounted for using the acquisition accounting method. Under the purchase accounting method, the Company measures the identifiable assets acquired, including identifiable intangible assets, and liabilities assumed in a business combination at fair value on the acquisition date. Goodwill is generally determined as the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. See Note 2 - Business Combination and Note 7 - Goodwill and Intangible Assets for further information.

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~~BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY~~

~~Notes to Unaudited Consolidated Financial Statements~~

Goodwill and intangible assets acquired in a purchase business combination and that are determined to have an indefinite useful life are not amortized, but tested for impairment at least annually or more frequently if events and circumstances exist that indicate the necessity for such impairment tests to be performed. The Company has selected November 30th as the date to perform the annual impairment test. Intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values. Goodwill is the only intangible asset with an indefinite life on the Company’s consolidated statement of financial condition.

Core deposit intangible assets arising from mergers and acquisitions are amortized on an accelerated basis reflecting the pattern in which the economic benefits of the intangible asset are consumed or otherwise used up. The estimated life of the core deposit intangible is approximately 10 years.

~~Variable Interest Entities (“VIE”)~~

An entity is considered to be a VIE when it does not have sufficient equity at investment at risk, the equity investors as a group lack the characteristics of a controlling financial interest, or the entity is structured with disproportionate voting rights and substantially all of the entity’s activities are conducted on behalf of an investor with disproportionately few voting rights. The Company is required to consolidate a VIE when it holds a variable interest in the VIE and is also the primary beneficiary of the VIE. CFC 45 is a Community Development Entity (“CDE”), and is considered to be a VIE. The Company is the primary beneficiary because it has the power to direct activities that most significantly affect the economic performance of CFC 45 and have the obligation to absorb the majority of the losses or benefits of its financial performance.

~~Noncontrolling Interests~~

For consolidated subsidiaries that are less than wholly-owned, the third-party holdings of equity interests are referred to as noncontrolling interests. The portion of net income attributable to noncontrolling interests for such subsidiaries is presented as net income applicable to noncontrolling interests on the consolidated statements of operations and comprehensive income, and the portion of the stockholders’ equity of such subsidiaries is presented as noncontrolling interests on the consolidated statements of financial condition and consolidated statements of changes in stockholders’ equity.

~~Recent Accounting Guidance~~

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-04, Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides optional expedients and exceptions regarding the accounting related to the modifications of certain contracts, relationships and other transactions that are affected by reference rate reform related to contracts that reference LIBOR or other reference rates that could be discontinued due to reference rate reform. This guidance was effective immediately and the amendments may be applied prospectively through December 31, 2022. The estimated financial impact has not yet been determined.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The amendments in this ASU are intended to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments are also intended to improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The guidance did not have a significant impact on the Company’s consolidated financial statements.

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~~BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY~~

~~Notes to Unaudited Consolidated Financial Statements~~

Accounting Pronouncements Yet to Be Adopted

In June 2016, the FASB issued ASU 2016-13, ~~“Financial~~Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 replaces the incurred loss model with an expected loss model, which is referred to as the current expected credit loss (“CECL”) model. The CECL model is applicable to the measurement of credit losses on financial assets measured at amortized cost, including loan receivables, held-to-maturity debt securities, and reinsurance receivables. It also applies to off-balance sheet credit exposures not accounted for as insurance (such as loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor. For debt securities with other-than-temporary impairment, the guidance will be applied prospectively. Existing ~~purchased~~purchase credit impaired (“PCI”) assets will be grandfathered and classified as purchased credit deteriorated (“PCD”) assets at the date of adoption. The asset will be grossed up for the allowance for expected credit losses for all PCD assets at the date of adoption and will continue to recognize the noncredit discount in interest income based on the yield of such assets as of the adoption date. Subsequent changes in expected credit losses will be recorded through the allowance. For all other assets within the scope of CECL, a cumulative-effect adjustment will be recognized in retained earnings as of the beginning of the first reporting period in which the guidance is effective.

On October 16, 2019, the FASB voted to affirm the proposed amended effective date for ASU 2016-13 for smaller reporting companies (“SRCs”) as defined by the SEC. The final ASU, which was issued in November 2019, delays the implementation date for ASU 2016-13 to fiscal years beginning after December 15, 2022. SRCs are defined as companies with less than $250 million of public float or less than $100 million in annual revenues for the previous year and no public float or public float of less than $700 million. The Company qualifies as an SRC, and management will implement ASU 2016-13 in the first quarter of 2023. The Company has selected a vendor model, formed an implementation committee and is in the process of refining the model. The estimated financial impact has not yet been determined.

In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. This ASU ~~is effective January 1, 2020 and~~ clarifies the scope of the credit losses standard and addresses issues related to accrued interest receivable balances, recoveries, variable interest rates and prepayments, among other things. The amendments to Topic 326 have the same effective dates as ASU 2016-13. This guidance ~~did~~is not expected to have a significant impact on the Company’s consolidated financial statements.

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In May 2019, the FASB issued ASU No. 2019-05, Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief. This ASU allows entities to irrevocably elect the fair value option on an instrument-by-instrument basis for eligible financial assets measured at amortized cost basis upon adoption of the credit loss standards. The effective date for this ASU is the same as for ASU 2016-13. WeManagement will evaluate this ASU in conjunction with ASU 2016-13 to determine ~~its~~whether the fair value option will be elected for any eligible financial assets.

In March 2022, the FASB issued ASU No. 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. This new accounting standard pertains to eliminating certain existing accounting guidance for troubled debt restructurings (“TDRs”) by creditors and adding additional disclosures related to the nature and characteristics of modifications of loans to borrowers experiencing financial difficulties and vintage disclosures for gross write-offs. The amendments to Topic 326 have the same effective dates as ASU 2016-13. This guidance is not expected to have a significant impact on ~~our~~the Company’s consolidated financial ~~condition and results of operations.~~statements.

NOTE (2) – Business Combination

The Company completed its merger with CFBanc Corporation (“CFBanc”) on April 1, 2021, with the Company continuing as the surviving entity (the “CFBanc Merger”). Immediately following this merger, Broadway Federal Bank, f.s.b., a subsidiary of Broadway Financial Corporation, merged with and into City First Bank of D.C., National Association, with City First Bank of D.C., National Association continuing as the surviving entity (which concurrently changed its name to City First Bank, National Association). As of the acquisition date, CFBanc ~~Corporation~~ had $471.0 million in total assets, $227.7 million in gross loans, and $353.7 million of total deposits.

On April 1, 2021, (1) each share of ~~CFBanc Corporation’s~~CFBanc’s Class A Common Stock, par value $0.50 per share, and Class B Common Stock, par value $0.50 per share, issued and outstanding immediately prior to the CFBanc Merger was converted into 13.626 validly issued, fully paid and nonassessable shares, respectively, of the voting common stock of the Company, par value $0.01 per share, which were renamed Class A Common Stock, and a new class of non-voting common stock of the Company, par value $0.01 per share, which was named Class B Common Stock, and (2) each share of Fixed Rate Cumulative Redeemable Perpetual Preferred Stock, Series B, par value $0.50 per share, of CFBanc ~~Corporation~~ (“CFBanc Corporation Preferred Stock”) issued and outstanding immediately prior to the effective time of the CFBanc Merger was converted into 1 validly issued, fully paid and non-assessable share of a new series of preferred stock of the Company, which was designated as the Company’s Fixed Rate Cumulative Redeemable Perpetual Preferred Stock, Series A, with such rights, preferences, privileges and voting powers, and limitations and restrictions thereof, which taken as a whole, are not materially less favorable to the holders of CFBanc Corporation Preferred Stock than the rights, preferences, privileges and voting powers, and limitations and restrictions thereof of CFBanc Corporation Preferred Stock. The total value of the consideration transferred to CFBanc ~~Corporation~~ shareholders was approximately $66.3 million, which was based on the closing price of the Company’s common stock on March 31, 2021, the last trading day prior to the consummation of the merger.

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~~BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY~~

~~Notes to Unaudited Consolidated Financial Statements~~

The Company accounted for the CFBanc Merger under the acquisition method of accounting which requires purchased assets and liabilities assumed to be recorded at their respective fair values at the date of acquisition. The Company determined the fair value of the acquired assets and assumed liabilities with the assistance of third-party valuation firms. G~~oodwill~~Goodwill in the amount of $26.0 million was recognized in the CFBanc Merger. Goodwill represents the future economic benefits arising from net assets acquired that are not individually identified and separately recognized and is attributable to synergies expected to be derived from the combination of the two entities. Goodwill is not amortized for financial reporting purposes; rather, it is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, by comparing its carrying value to the reporting unit’s fair value. Goodwill recognized in this transaction is not deductible for income tax purposes.

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The following table represents the assets acquired and liabilities assumed in the CFBanc Merger as of April 1, 2021, and the fair value adjustments and amounts recorded by the Company as of the same date under the acquisition method of accounting:

	CFBanc Book Value			Fair Value Adjustments			Fair Value
Assets acquired	(In thousands)
Cash and cash equivalents	$	84,745		$	0		$	84,745
Securities available-for-sale		150,052			(77	)		149,975
Loans receivable held for investment:
Gross loans receivable held for investment		227,669			(1,784	)		225,885
Deferred fees and costs		(315	)		315			0
Allowance for loan losses		(2,178	)		2,178			0
		225,176			709			225,885
Accrued interest receivable		1,637			0			1,637
FHLB and FRB stock		1,061			0			1,061
Office properties and equipment		5,152			1,801			6,953
Deferred tax assets, net		890			(1,608	)		(718	)
Core deposit intangible		0			3,329			3,329
Other assets		2,290			0			2,290
Total assets	$	471,003		$	4,154		$	475,157

Liabilities assumed
Deposits	$	353,671		$	51		$	353,722
Securities sold under agreements to repurchase		59,945			0			59,945
FHLB advances		3,057			109			3,166
Notes payable		14,000			0			14,000
Accrued expenses and other liabilities		4,063			0			4,063
Total liabilities	$	434,736		$	160		$	434,896

Excess of assets acquired over liabilities assumed	$	36,267		$	3,994		$	40,261
Consideration paid							$	66,257
Goodwill recognized							$	25,996

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~~BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY~~

~~Notes to Unaudited Consolidated Financial Statements~~

The fair values are preliminary estimates and are subject to adjustment for up to one year after the merger date or when additional information relative to the closing date fair values becomes available and such information is considered final, whichever is earlier. These changes could differ materially from what is presented above.

The contractual amounts due, expected cash flows to be collected, the interest component, and the fair value of loans acquired from CFBanc as of the acquisition date were as ~~follows:~~follows (in thousands):

	Acquired Loans
	(In thousands)

Contractual amounts due	$	231,432		$	231,432
Cash flows not expected to be collected		(3,666	)		(3,666	)
Expected cash flows		227,766			227,766
Interest component of expected cash flows		(1,881	)		(1,881	)
Fair value of acquired loans	$	225,885		$	225,885

A component of total loans acquired from CFBanc were loans that were considered to be purchased credit impaired loans ~~(PCI loans)~~(“PCI loans”). Refer to Note 65 for additional information regarding PCI loans. The following table presents the amounts that comprise the fair value of PCI loans (in thousands):

Contractual amounts due	$	1,825
Nonaccretable difference (cash flows not expected to be collected)		(634	)
Expected cash flows		1,191
Accretable yield		(346	)
Fair value of acquired loans	$	845

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In accordance with generally accepted accounting principles, there was no carryover of the allowance for loan losses that had been previously recorded on loans by CFBanc.

The operating results of CFBanc for the three and six months ended June 30, 2021 are included in the operating results of the Company since the merger date. The following table presents the amounts related to CFBanc’s operations included in the Company’s consolidated statement of operations from April 1 through June 30, 2021:

	~~(In thousands)~~
~~Net interest income~~	$	~~2,896~~
~~Net income~~	$	~~966~~

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~~BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY~~

~~Notes to Unaudited Consolidated Financial Statements~~

The following table presents the net interest income, net income, and earnings per share as if the CFBanc Merger was effective as of January 1, ~~2020.~~2021. The unaudited pro forma financial information included in the table below is based on various estimates and is presented for informational purposes only and does not indicate the financial condition or results of operations of the combined Company that would have been achieved for the periods presented had the transactions been completed as of the date indicated or that may be achieved in the future.

	Three Months Ended		Six Months Ended
	June 30, 2021		June 30, 2021
	(Dollars in thousands except per share amounts)
Net interest income	$	5,828		$	11,018
Net income (loss)		708			(3,576	)

Basic earnings per share	$	0.01		$	(0.05	)
Diluted earnings per share	$	0.01		$	(0.05	)

Three Months Ended
Six Months Ended

June 30,
2021

June 30,
2020
June 30, 2021
June 30,
2020

(Dollars in thousands except per share amounts)
Net interest income $ 5,821 $ 5,173 $ 11,011 $ 10,331
Net income (loss) 723 476 (3,539 ) 189

Basic earnings per share $ 0.01 $ 0.01 $ (0.06 ) $ 0.00
Diluted earnings per share $ 0.01 $ 0.01 $ (0.06 ) $ 0.00

~~NOTE (~~3) ~~– Capital Raise~~

On April 6, 2021, the Company completed the sale of 18,474,000 shares of Broadway Financial Corporation common stock in private placements to institutional and accredited investors at a purchase price of $1.78 per share for an aggregate purchase price of $32.9 million (net of expenses).

~~The following table shows the common stock issued on April 1, 2021 as a result of the merger and on April 6, 2021 as a result of the private placements by class:~~

Common Shares Outstanding

Voting
Class A

Nonvoting
Class B

Nonvoting
Class C

Total
Shares

Shares outstanding March 31, 2021:
19,142,498
0 8,756,396 27,898,894

Shares issued in merger 13,999,870 11,404,621 0 25,404,491
Shares exchanged post-merger (681,300 ) 0 681,300 0
Shares cancelled (52,105 ) 0 0 (52,105 )
Shares issued in private placements 11,221,921 0 7,252,079 18,474,000

Shares outstanding April 6, 2021: 43,630,884 11,404,621 16,689,775 71,725,280

NOTE ~~(4)~~(3) – Earnings Per Share of Common Stock

Basic earnings per share of common stock is computed pursuant to the two-class method by dividing net income available to common stockholders less dividends paid on participating securities (unvested shares of restricted common stock) and any undistributed earnings attributable to participating securities by the weighted average common shares outstanding during the period. The weighted average common shares outstanding includes the weighted average number of shares of common stock outstanding less the weighted average number of unvested shares of restricted common stock. ESOP shares are considered outstanding for this calculation unless unearned. Diluted earnings per share of common stock includes the dilutive effect of unvested stock awards and additional potential common shares issuable under stock options.

~~Table of Contents~~

~~BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY~~

~~Notes to Unaudited Consolidated Financial Statements~~

The following table shows how the Company computed basic and diluted earnings (loss) per share of common stock for the periods indicated:

	For the three months ended June 30,				For the six months ended June 30,					For the three months ended June 30,				For the six months ended June 30,
	2021		2020		2021			2020		2022		2021		2022		2021
	(Dollars in thousands, except per share )									(Dollars in thousands, except per share)

Net income (loss) attributable to Broadway Financial Corporation	$	701	$	216	$	(2,786	)	$	183	$	1,854	$	701	$	2,812	$	(2,786	)
Less net income (loss) attributable to participating securities		0		2		0			2		12		0		18		0
Income (loss) available to common stockholders	$	701	$	214	$	(2,786	)	$	181	$	1,842	$	701	$	2,794	$	(2,786	)

Weighted average common shares outstanding for basic earnings (loss) per common share		70,163,639		27,143,340		48,873,496			27,055,750		72,527,974		70,163,639		72,292,735		48,873,496
Add: dilutive effects of unvested restricted stock awards		140,247		307,376		0			337,097		461,047		140,247		467,890		0
Add: dilutive effects of assumed exercise of stock options											0		0		7,982		0
Weighted average common shares outstanding for diluted earnings (loss) per common share		70,303,886		27,450,716		48,873,496			27,392,847		72,989,021		70,303,886		72,768,607		48,873,496

Earnings (loss) per common share - basic	$	0.01	$	0.01	$	(0.06	)	$	0.01	$	0.03	$	0.01	$	0.04	$	(0.06	)
Earnings (loss) per common share - diluted	$	0.01	$	0.01	$	(0.06	)	$	0.01	$	0.03	$	0.01	$	0.04	$	(0.06	)

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Stock options for 450,000 shares of common stock for the six months ended June 30, 2021 were not considered in computing diluted earnings per common share because they were anti-dilutive due to the net loss. There were 0 unvested restricted stock awards outstanding during the three months ended June 30, 2021.

NOTE ~~(5)~~(4) – Securities

The following table summarizes the amortized cost and fair value of the available-for-sale investment securities portfolios as of the ~~periods~~dates indicated and the corresponding amounts of unrealized gains and losses which were recognized in accumulated other comprehensive income (loss):

	Amortized Cost			Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(In thousands)										(In thousands)
June 30, 2021:
June 30, 2022:
Federal agency mortgage-backed securities		$	83,687	$	629	$	(60	)	$	84,256	$	90,453	$	13	$	(7,364	)	$	83,102
Federal agency collateralized mortgage obligations (“CMO”)												27,385		79		(644	)		26,820
Federal agency debt			33,207		199		0			33,406		51,598		47		(2,771	)		48,874
Municipal bonds			4,914		63		(5	)		4,972		4,882		0		(543	)		4,339
U. S. Treasuries			18,191		24		0			18,215
U.S. Treasuries												62,656		63		(1,539	)		61,180
SBA pools			17,581		403		(1	)		17,983		15,189		25		(1,231	)		13,983
Total available-for-sale securities		$	157,580	$	1,318	$	(66	)	$	158,832	$	252,163	$	227	$	(14,092	)	$	238,298
December 31, 2020:
December 31, 2021:
Federal agency mortgage-backed securities		$	5,550	$	257	$	0		$	5,807	$	70,078	$	196	$	(244	)	$	70,030
Federal agency CMOs												9,391		11		(115	)		9,287
Federal agency debt			2,682		190		0			2,872		38,152		106		(270	)		37,988
Municipal bonds			2,000		19		0			2,019		4,898		40		(23	)		4,915
U.S. Treasuries												18,169		0		(218	)		17,951
SBA pools												16,241		122		(138	)		16,225
Total available-for-sale securities		$	10,232	$	466	$	0		$	10,698	$	156,929	$	475	$	(1,008	)	$	156,396

~~Table of Contents~~

~~BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY~~

~~Notes to Unaudited Consolidated Financial Statements~~

~~At June 30, 2021, the Bank had~~ 13 (13) federal agency debt securities with total amortized cost of $33.2 million, estimated total fair value of $33.4 million and an estimated average remaining life of 6.1 years; NaN (94) federal agency mortgage-backed securities with total amortized cost of $83.7 million, estimated total fair value of $84.3 million and an estimated average remaining life of 4.6 years; 9 (9) U.S. treasury securities with total amortized cost of $18.2 million, estimated total fair value of $18.2 million and an estimated average remaining life of 4.1 years; 17 (17) SBA pools securities with total amortized cost of $17.6 million, estimated total fair value of $18.0 and an estimated average remaining life of 5.4 years; 2 (2) municipal bond – taxable securities with total amortized cost of $1.2 million, estimated total fair value of $1.2 million and an estimated average remaining life of 4.1 years; 7 (7) municipal bonds – exempt pools securities with total amortized cost of $3.7 million, estimated total fair value of $3.8 million and an estimated average remaining life of 12.5 years . The entire securities portfolio at June 30, 2021, consisted of NaN securities (142) with an estimated average remaining life of 4.7 years. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties

The amortized cost and estimated fair value of all investment securities available-for-sale at June 30, 2021, by contractual maturities are shown below. Contractual maturities may differ from expected maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value
(In thousands)

Due in one year or less $ 0 $ 0 $ 0 $ 0
Due after one year through five years 30,244 42 0 30,286
Due after five years through ten years 23,002 294 (11 ) 23,285
Due after ten years ⁽¹⁾
104,334 982 (55 ) 105,261
$ 157,580 $ 1,318 $ (66 ) $ 158,832

~~(1)~~

~~Mortgage-backed securities, collateralized mortgage obligations and SBA pools do not have a single stated maturity date and therefore have been included in the “Due after ten years” category.~~

The Bank held 32175 securities with unrealized losses of ~~$66 thousand~~$14.1 million at June 30, 2022. NaN, 31, of these securities had aggregate unrealized losses of $200 thousand and been in a loss position for greater than one year. The Bank’s securities were primarily issued by the federal government or its agencies. The unrealized gains or losses on our available-for-sale securities as of June 30, 2022, were primarily caused by movements in market interest rates subsequent to the purchase of such securities.

The Bank held 129 securities with unrealized losses of $1.0 million at December 31, 2021. ~~NaNne~~NaN of these securities has been in a loss position for greater than one year. The Bank’s securities were primarily issued by the federal government or its agencies. The unrealized gains or losses on our available-for-sale securities at ~~June 30,~~December 31, 2021 were primarily caused by movements in market interest rates subsequent to the purchase of such ~~securities~~securities.

Securities with a market value of ~~$71.9~~$72.7 million were pledged as collateral for securities sold under agreements to repurchase as of June 30, ~~2021~~2022, and included ~~$17.8~~$35.1 million of U.S. Government Agency securities, ~~$47.5~~$27.6 million of mortgage-backed securities, ~~and $6.6~~$6.2 million of ~~collateralized mortgage obligations. (See Note 8 – Borrowings.) There~~SBA pool securities and $3.8 million of federal agency CMO. Securities with a market value of $53.2 million were ~~0 securities~~ pledged as collateral for securities sold under agreements to repurchase as of December 31, ~~2020.~~2021, and included $25.9 million of federal agency mortgage-backed securities, $13.3 million of federal agency debt, $9.8 million of SBA pool securities, and $4.2 million of federal agency CMO. (See Note 8 – Borrowings). There were 0 securities pledged to secure public deposits at June 30, ~~2021~~2022 or December 31, ~~2020.~~2021.

At June 30, ~~2021~~2022, and December 31, ~~2020,~~2021, there were 0 holdings of securities by any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of stockholders’ equity.

~~There were 0 sales of securities during the three and six months ended June 30, 2021 and 2020.~~

1310

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~~BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY~~The amortized cost and estimated fair value of all investment securities available-for-sale at June 30, 2022, by contractual maturities are shown below. Contractual maturities may differ from expected maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

~~Notes to Unaudited Consolidated Financial Statements~~

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(In thousands)

Due in one year or less	$	1,005	$	0	$	(5	)	$	1,000
Due after one year through five years		103,542		63		(3,393	)		100,212
Due after five years through ten years		40,021		55		(2,173	)		37,903
Due after ten years ⁽¹⁾		107,595		109		(8,521	)		99,183
	$	252,163	$	227	$	(14,092	)	$	238,298

⁽¹⁾	^{Mortgage-backed securities, collateralized mortgage obligations and SBA pools do not have a single stated maturity date and therefore have been included in the “Due after ten years” category.}

At June 30, 2022 and December 31, 2021, there were 0 holdings of securities by any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of stockholders’ equity.

NOTE ~~(6)~~(5) – Loans Receivable Held for Investment

Loans receivable held for investment were as follows as of the dates indicated:

	June 30, 2021			December 31, 2020			June 30, 2022			December 31, 2021
	(In thousands)						(In thousands)
Real estate:
Single family	$	53,556		$	48,217		$	32,597		$	45,372
Multi-family		346,192			272,387			405,140			393,704
Commercial real estate		92,491			24,289			85,156			93,193
Church		15,652			16,658			20,626			22,503
Construction		22,677			429			36,168			32,072
Commercial – other		46,973			57			64,591			46,539
SBA loans⁽¹⁾		40,027			0			4,451			18,837
Consumer		73			7			51			0
Gross loans receivable before deferred loan costs and premiums		617,641			362,044			648,780			652,220
Unamortized net deferred loan costs and premiums		373			1,300			1,902			1,526
Gross loans receivable		618,014			363,344			650,682			653,746
Credit and interest marks on purchased loans, net								(852	)		(1,842	)
Allowance for loan losses		(3,296	)		(3,215	)		(2,962	)		(3,391	)
Loans receivable, net	$	614,718		$	360,129		$	646,868		$	648,513

⁽¹⁾

Including Paycheck Protection Program (PPP) loans.

~~(1)~~ ~~Including~~

As of June 30, 2022 and December 31, 2021, the commercial loan category above included $3.6 million and $18.0 million, respectively, of loans issued under the SBA’s Paycheck Protection Program (PPP) ~~loans.~~. PPP loans have terms of two to five years and earn interest at 1%. PPP loans are fully guaranteed by the SBA and have virtually no risk of loss. The Bank expects the vast majority of the PPP loans to be fully forgiven by the SBA.

~~Purchased Credit Impaired (PCI) Loans~~

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As part of the CFBanc Merger, the Company acquired loans for which there was, at acquisition, evidence of credit deterioration of credit quality since origination and for which it was probable, at acquisition, that all contractually required payments would not be collected. Prior to the CFBanc Merger, there were 0 such acquired loans. The carrying amount of those loans as of ~~June~~ June30, 2022, and December 31, 2021, iswas as follows:

	June 30, 2021		June 30, 2022		December 31, 2021
	(In thousands)		(In thousands)
Real estate:
Single family	$	534	$	53	$	558
Commercial real estate		187		0		221
Commercial - other		84
Commercial – other				107		104
	$	805	$	160	$	883

On the acquisition date, the amount by which the undiscounted expected cash flows of the ~~purchased credit impaired~~PCI loans exceeded the estimated fair value of the loan is the accretable yield. The accretable yield is measured at each financial reporting date and represents the difference between the remaining undiscounted cash flows and the current carrying value of the ~~purchased credit impaired~~PCI loan. At June30, 2022, and December 31, 2021, NaN of the Company’s ~~purchased credit impaired~~PCI loans were classified as nonaccrual.

~~Table of Contents~~

~~BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY~~

~~Notes to Unaudited Consolidated Financial Statements~~

The following table summarizes the accretable yield on the ~~purchased credit impaired~~PCI loans for the three and six months ended June30, ~~2021~~2022: and June 30, 2021:

							Three months ended June 30, 2022		Six months ended June 30, 2022
	Three Months Ended June 30, 2021			Six Months Ended June 30, 2021					(In thousands)
	(In thousands)
Balance at the beginning of the period	$	0		$	0		$	165	$	883
Additions		346			346
Deduction due to payoffs								0		(707	)
Accretion		(19	)		(19	)		5		16
Balance at the end of the period	$	327		$	327		$	160	$	160

	Three months ended June 30, 2021		Six months ended June 30, 2021
	(In thousands)

Balance at the beginning of the period	$	0	$	0
Additions		346		346
Accretion		19		19
Balance at the end of the period	$	327	$	327

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The following tables present the activity in the allowance for loan losses by loan type for the periods indicated:

	Three Months Ended June 30, 2021
	Real Estate																					For the three months ended June 30, 2022
	Single family			Multi- family		Commercial real estate		Church			Construction		Commercial - other			SBA Loans		Consumer		Total		Real Estate
	(In thousands)																					Single Family			Multi- Family			Commercial Real Estate			Church			Construction			Commercial - Other		Consumer		Total
Beginning balance	$	275		$	2,473	$	219	$	221		$	22	$	5		$	0	$	0	$	3,215	$	157		$	2,771		$	217		$	63		$	236		$	95	$	0	$	3,539
Provision for (recapture of) loan losses		(105	)		133		8		(13	)		59		(1	)		0		0		81		(37	)		(493	)		(64	)		(15	)		(15	)		43		4		(577	)
Recoveries		0			0		0		0			0		0			0		0		0		0			0			0			0			0			0		0		0
Loans charged off		0			0		0		0			0		0			0		0		0		0			0			0			0			0			0		0		0
Ending balance	$	170		$	2,606	$	227	$	208		$	81	$	4		$	0	$	0	$	3,296	$	120		$	2,278		$	153		$	48		$	221		$	138	$	4	$	2,962

	Three Months Ended June 30, 2020
	Real Estate																						For the three months ended June 30, 2021
	Single family		Multi- family		Commercial real estate		Church			Construction			Commercial - other			SBA Loans		Consumer			Total		Real Estate
	(In thousands)																						Single Family			Multi- Family		Commercial Real Estate		Church			Construction		Commercial - Other			Consumer		Total
Beginning balance	$	308	$	2,408	$	140	$	323		$	24		$	7		$	0	$	1		$	3,211	$	275		$	2,473	$	219	$	221		$	22	$	5		$	0	$	3,215
Provision for (recapture of) loan losses		0		16		29		(41	)		(2	)		(1	)		0		(1	)		0		(105	)		133		8		(13	)		59		(1	)		0		81
Recoveries		4		0		0		0			0			0			0		0			4		0			0		0		0			0		0			0		0
Loans charged off		0		0		0		0			0			0			0		0			0		0			0		0		0			0		0			0		0
Ending balance	$	312	$	2,424	$	169	$	282		$	22		$	6		$	0	$	0		$	3,215	$	170		$	2,606	$	227	$	208		$	81	$	4		$	0	$	3,296

	Six Months Ended June 30, 2021
	Real Estate																					For the six months ended June 30, 2022
	Single family			Multi-family		Commercial real estate		Church			Construction		Commercial - other		SBA Loans		Consumer			Total		Real Estate
				(In thousands)																		Single Family			Multi- Family			Commercial Real Estate			Church			Construction		Commercial - Other		Consumer			Total
Beginning balance	$	296		$	2,433	$	222	$	237		$	22	$	4	$	0	$	1		$	3,215	$	145		$	2,657		$	236		$	103		$	212	$	23	$	15		$	3,391
Provision for (recapture of) loan losses		(126	)		173		5		(29	)		59		0		0		(1	)		81		(25	)		(379	)		(83	)		(55	)		9		115		(11	)		(429	)
Recoveries		0			0		0		0			0		0		0		0			0		0			0			0			0			0		0		0			0
Loans charged off		0			0		0		0			0		0		0		0			0		0			0			0			0			0		0		0			0
Ending balance	$	170		$	2,606	$	227	$	208		$	81	$	4	$	0	$	0		$	3,296	$	120		$	2,278		$	153		$	48		$	221	$	138	$	4		$	2,962

	For the six months ended June 30, 2021
	Real Estate
	Single Family			Multi- Family		Commercial Real Estate		Church			Construction		Commercial - Other		Consumer			Total
Beginning balance	$	296		$	2,433	$	222	$	237		$	22	$	4	$	1		$	3,215
Provision for (recapture of) loan losses		(126	)		173		5		(29	)		59		0		(1	)		81
Recoveries		0			0		0		0			0		0		0			0
Loans charged off		0			0		0		0			0		0		0			0
Ending balance	$	170		$	2,606	$	227	$	208		$	81	$	4	$	0		$	3,296

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~~BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY~~

~~Notes to Unaudited Consolidated Financial Statements~~

Six Months Ended June 30, 2020
Real Estate
Single family Multi-family Commercial real estate Church Construction Commercial - other
SBA
Loans
Consumer Total
(In thousands)
Beginning balance $ 312 $ 2,319 $ 133 $ 362 $ 48 $ 7 $ 0 $ 1 $ 3,182
Provision for (recapture of) loan losses (4 ) 105 36 (80 ) (26 ) (1 ) 0 (1 ) 29
Recoveries 4 0 0 - 0 0 0 0 4
Loans charged off 0 0 0 0 0 0 0 0 0
Ending balance $ 312 $ 2,424 $ 169 $ 282 $ 22 $ 6 $ 0 $ 0 $ 3,215

The following tables present the balance in the allowance for loan losses and the recorded investment (unpaid contractual principal balance less charge-offs, less interest applied to principal, plus unamortized deferred costs and premiums) by loan type and based on impairment method as of the dates indicated:

June 30, 2021
Real Estate

Single
family

Multi-
family

Commercial
real estate
Church Construction Commercial - other SBA
Loans
Consumer Total
(In thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment $ 3 $ 0 $ 0 $ 42 $ 0 $ 0 $ 0 $ 0 $ 45
Collectively evaluated for impairment 167 2,606 227 166 81 4 0 0 3,251
Total ending allowance balance $ 170 $ 2,606 $ 227 $ 208 $ 81 $ 4 $ 0 $ 0 $ 3,296
Loans:
Loans individually evaluated for impairment $ 66 $ 290 $ 0 $ 3,718 $ 0 $ 0 $ 0 $ 0 $ 4,074
Loans collectively evaluated for impairment 53,600 347,540 92,491 11,602 22,583 46,973 39,078 73 613,940
Total ending loans balance $ 53,666 $ 347,830 $ 92,491 $ 15,320 $ 22,583 $ 46,973 $ 39,078 $ 73 $ 618,014

	December 31, 2020																		June 30, 2022
	Real Estate																		Real Estate
	Single family		Multi- family		Commercial real estate		Church		Construction		Commercial - other			SBA Loans	Consumer		Total		Single Family		Multi- Family		Commercial Real Estate		Church		Construction		Commercial - Other		Consumer		Total
	(In thousands)																(In thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	89	$	0	$	0	$	52	$	0	$	0	$	0	$	0	$	141	$	3	$	0	$	0	$	4	$	0	$	0	$	0	$	7
Collectively evaluated for impairment		207		2,433		222		185		22		4		0		1		3,074		117		2,278		153		44		221		138		4		2,955
Total ending allowance balance	$	296	$	2,433	$	222	$	237	$	22	$	4	$	0	$	1	$	3,215	$	120	$	2,278	$	153	$	48	$	221	$	138	$	4	$	2,962
Loans:
Loans individually evaluated for impairment	$	573	$	298	$	0	$	3,813	$	0	$	47	$	0	$	0	$	4,731	$	62	$	271	$	0	$	1,864	$	0	$	0	$	0	$	2,197
Loans collectively evaluated for impairment		47,784		273,566		24,322		12,495		430		9		0		7		358,613		22,849		375,409		18,748		9,713		30,762		43,305		51		500,837
Subtotal																				22,911		375,680		18,748		11,577		30,762		43,305		51		503,034
Loans acquired in the Merger																				9,732		31,556		66,360		9,000		5,264		25,736		0		147,648
Total ending loans balance	$	48,357	$	273,864	$	24,322	$	16,308	$	430	$	56	$	0	$	7	$	363,344	$	32,643	$	407,236	$	85,108	$	20,577	$	36,026	$	69,041	$	51	$	650,682

	December 31, 2021
	Real Estate
	Single Family		Multi- Family		Commercial Real Estate		Church		Construction		Commercial - Other		SBA		Total

Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	3	$	0	$	0	$	4	$	0	$	0	$	0	$	7
Collectively evaluated for impairment		142		2,657		236		99		212		23		15		3,384
Total ending allowance balance	$	145	$	2,657	$	236	$	103	$	212	$	23	$	15	$	3,391
Loans:
Loans individually evaluated for impairment	$	65	$	282	$	0	$	1,954	$	0	$	0	$	0	$	2,301
Loans collectively evaluated for impairment		32,599		353,179		25,507		9,058		24,225		3,124		0		447,692
Subtotal		32,664		353,461		25,507		11,012		24,225		3,124		0		449,993
Loans acquired in the Merger		12,708		41,769		67,686		11,491		7,847		43,415		18,837		203,753
Total ending loans balance	$	45,372	$	395,230	$	93,193	$	22,503	$	32,072	$	46,539	$	18,837	$	653,746

~~Table of Contents~~

~~BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY~~

~~Notes to Unaudited Consolidated Financial Statements~~

The following table presents information related to loans individually evaluated for impairment by loan type as of the ~~periods~~dates indicated:

	June 30, 2021						December 31, 2020						June 30, 2022						December 31, 2021
	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
	(In thousands)												(In thousands)
With no related allowance recorded:
Single family	$	0	$	0	$	-	$	2	$	1	$	-
Multi-family		290		290		-		298		298		-	$	271	$	271	$	-	$	282	$	282	$	-
Church		2,487		1,914		-		2,527		1,970		-		2,085		1,772		-		1,854		1,854		-
With an allowance recorded:
Single family		66		66		3		573		573		88		62		62		3		65		65		3
Church		1,804		1,804		42		1,842		1,842		52		92		92		4		100		100		4
Commercial - other		0		0		0		47		47		1
Total	$	4,647	$	4,074	$	45	$	5,289	$	4,731	$	141	$	2,510	$	2,197	$	7	$	2,301	$	2,301	$	7

The recorded investment in loans excludes accrued interest receivable due to immateriality. For purposes of this disclosure, the unpaid principal balance is not reduced for net charge-offs.

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The following tables present the monthly average of loans individually evaluated for impairment by loan type and the related interest income for the periods indicated:

Three Months Ended June 30, 2021 Three Months Ended June 30, 2020

Average
Recorded
Investment

Cash Basis
Interest
Income
Recognized

Average
Recorded
Investment

Cash Basis
Interest
Income
Recognized

(In thousands)
Single family $ 316 $ 4 $ 597 $ 7
Multi-family 292 5 308 5
Church 3,742 63 4,160 74
Commercial - other 11 0 59 1
Total $ 4,361 $ 72 $ 5,124 $ 87

Six Months Ended June 30, 2021 Six Months Ended June 30, 2020

Average
Recorded Investment

Cash Basis
Interest
Income
Recognized

Average
Recorded
Investment

Cash Basis
Interest
Income
Recognized

(In thousands)
Single family $ 426 $ 10 $ 599 $ 14
Multi-family 294 10 309 11
Church 3,766 126 4,190 309
Commercial - other 26 1 60 2
Total $ 4,512 $ 147 $ 5,158 $ 336

~~Table of Contents~~

	Three Months Ended June 30, 2022				Three Months Ended June 30, 2021
	Average Recorded Investment		Cash Basis Interest Income Recognized		Average Recorded Investment		Cash Basis Interest Income Recognized
	(In thousands)
Single family	$	63	$	1	$	316	$	4
Multi-family		274		5		292		5
Church		2,197		25		3,742		63
Commercial - other		0		0		11		0
Total	$	2,534	$	31	$	4,361	$	72

~~BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY~~

	Six Months Ended June 30, 2022				Six Months Ended June 30, 2021
	Average Recorded Investment		Cash Basis Interest Income Recognized		Average Recorded Investment		Cash Basis Interest Income Recognized
	(In thousands)
Single family	$	64	$	2	$	426	$	10
Multi-family		276		10		294		10
Church		2,210		50		3,766		126
Commercial - other		0		0		26		1
Total	$	2,550	$	62	$	4,512	$	147

~~Notes to Unaudited Consolidated Financial Statements~~

Cash-basis interest income recognized represents cash received for interest payments on accruing impaired loans and interest recoveries on non-accrual loans that were paid off. Interest payments collected on non-accrual loans are characterized as payments of principal rather than payments of the outstanding accrued interest on the loans until the remaining principal on the non-accrual loans is considered to be fully collectible or paid off. When a loan is returned to accrual status, the interest payments that were previously applied to principal are deferred and amortized over the remaining life of the loan. Foregone interest income that would have been recognized had loans performed in accordance with their original terms amounted to ~~$19~~$23 thousand and ~~$22~~$19 thousand for the three months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively, and ~~$38~~$54 thousand and ~~$45~~$38 thousand for the six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively, and were not included in the consolidated results of operations.

As15

Table of ~~June~~ Contents~~30,2021,~~ ~~the Bank had~~ ~~$1.9 million~~ in 30 to 89 ~~days delinquencies, and 0 loans were past due~~ 90 ~~days or more.~~

The following tables present the aging of the recorded investment in past due loans by loan type as of the ~~periods~~dates indicated:

	June 30, 2021												June 30, 2022
	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Current		Total		30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Current		Total
	(In thousands)												(In thousands)
Loans receivable held for investment:
Single family	$	0	$	0	$	0	$	0	$	53,666	$	53,666	$	0	$	0	$	0	$	0	$	32,643	$	32,643
Multi-family		0		0		0		0		347,830		347,830		0		0		0		0		407,236		407,236
Commercial real estate		1,554		0		0		1,554		90,937		92,491		0		0		0		0		85,108		85,108
Church		0		0		0		0		15,320		15,320		0		0		0		0		20,577		20,577
Construction		0		0		0		0		22,583		22,583		0		0		0		0		36,026		36,026
Commercial - other		0		310		0		310		46,663		46,973		0		0		0		0		64,590		64,590
SBA loans		21		0		0		21		39,057		39,078		0		0		0		0		4,451		4,451
Consumer		0		0		0		0		73		73		0		0		0		0		51		51
Total	$	1,575	$	310	$	0	$	1,885	$	616,129	$	618,014	$	0	$	0	$	0	$	0	$	650,682	$	650,682

	December 31, 2020												December 31, 2021
	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Current		Total		30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Current		Total
	(In thousands)												(In thousands)
Loans receivable held for investment:
Single family	$	0	$	0	$	0	$	0	$	48,357	$	48,357	$	0	$	0	$	0	$	0	$	45,372	$	45,372
Multi-family		0		0		0		0		273,864		273,864		0		0		0		0		395,230		395,230
Commercial real estate		0		0		0		0		24,322		24,322		0		2,423		0		2,423		90,770		93,193
Church		0		0		0		0		16,308		16,308		0		0		0		0		22,503		22,503
Construction		0		0		0		0		430		430		0		0		0		0		32,072		32,072
Commercial - other		0		0		0		0		56		56		0		0		0		0		46,539		46,539
Consumer		0		0		0		0		7		7		0		0		0		0		18,837		18,837
Total	$	0	$	0	$	0	$	0	$	363,344	$	363,344	$	0	$	2,423	$	0	$	2,423	$	651,323	$	653,746

The following table presents the recorded investment in non-accrual loans by loan type as of the ~~periods~~dates indicated:

	June 30, 2021		December 31, 2020		June 30, 2022		December 31, 2021
	(In thousands)				(In thousands)
Loans receivable held for investment:
Single-family residence	$	0	$	1
Church		735		786	$	627	$	684
Total non-accrual loans	$	735	$	787	$	627	$	684

~~Table of Contents~~

~~BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY~~

~~Notes to Unaudited Consolidated Financial Statements~~

There were 0 loans 90 days or more delinquent that were accruing interest as of June 30, ~~2021~~2022 or December 31, ~~2020.~~2021. NaN of the church non-accrual loans were delinquent, but none qualified for accrual status as of the ~~periods~~dates indicated.

Troubled Debt Restructurings (TDRs)

In March 2020, a joint statement was issued by federal and state regulatory agencies, after consultation with the FASB, to clarify that short-term loan modifications, such as payment deferrals, fee waivers, extensions of repayment terms or other insignificant payment delays, are not TDRs if made on a good-faith basis in response to COVID-19 to borrowers who were current prior to any relief. Under this guidance, six months or less is provided as an example of short-term, and current is defined as less than 30 days past due at the time the modification program is implemented. The guidance also provides that these modified loans generally will not be classified as non-accrual loans during the term of the modification.

The Bank has implemented a loan modification program for the effects of COVID-19 on its borrowers. At the date of this filing, 0 borrowers have requested loan modifications. To date, 0 modifications have been granted.

At June 30, ~~2021,~~2022, loans classified as TDRs totaled ~~$4.1~~$2.0 million, of which ~~$408~~$164 thousand were included in non-accrual loans and ~~$3.7~~$1.9 million were on accrual status. At December 31, ~~2020,~~2021, loans classified as TDRs totaled ~~$4.2~~$1.8 million, of which ~~$232~~$188 thousand were included in non-accrual loans and ~~$4.0~~$1.6 million were on accrual status. The Company has allocated ~~$45 thousand and $141~~$7 thousand of specific reserves for accruing TDRs as of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. TDRs on accrual status are comprised of loans that were accruing at the time of restructuring or loans that have complied with the terms of their restructured agreements for a satisfactory period of time and for which the Bank anticipates full repayment of both principal and interest. TDRs that are on non-accrual status can be returned to accrual status after a period of sustained performance, generally determined to be six months of timely payments, as modified. A well-documented credit analysis that supports a return to accrual status based on the borrower’s financial condition and prospects for repayment under the revised terms is also required. As of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company had 0 commitment to lend additional amounts to customers with outstanding loans that are classified as TDRs. NaN loans were modified during the three or six months ended June 30, ~~2021~~2022 and ~~2020.~~2021.

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Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such ~~as:~~as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. For single family residential, consumer and other smaller balance homogenous loans, a credit grade is established at inception, and generally only adjusted based on performance. Information about payment status is disclosed elsewhere herein. The Company analyzes all other loans individually by classifying the loans as to credit risk. This analysis is performed at least on a quarterly basis. The Company uses the following definitions for risk ratings:

◾●

Watch. Loans classified as watch exhibit weaknesses that could threaten the current net worth and paying capacity of the obligors. Watch graded loans are generally performing and are not more than 59 days past due. A watch rating is used when a material deficiency exists, but correction is anticipated within an acceptable time frame.

◾●

Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

◾●

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

~~Table of Contents~~

~~BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY~~

~~Notes to Unaudited Consolidated Financial Statements~~

◾●

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

◾●

Loss. Loans classified as loss are considered uncollectible and of such little value that to continue to carry the loan as an active asset is no longer warranted.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. Pass rated loans are generally well protected by the current net worth and paying capacity of the obligor and/or by the value of the underlying collateral. Pass rated loans are not more than 59 days past due and are generally performing in accordance with the loan terms. Based on the most recent analysis performed, the risk categories of loans by loan type as of the ~~periods~~dates indicated were as follows:

	June 30, 2021												June 30, 2022
	Pass		Watch		Special Mention		Substandard		Doubtful		Loss		Pass		Watch		Special Mention		Substandard		Doubtful		Loss		Total
	(In thousands)												(In thousands)
Single family	$	53,666	$	0	$	0	$	0	$	0	$	0	$	31,607	$	363	$	265	$	408	$	0	$	0	$	32,643
Multi-family		347,477		0		0		353		0		0		390,186		4,694		4,216		8,140		0		0		407,236
Commercial real estate		91,018		0		0		1,473		0		0		66,110		8,338		5,930		4,730		0		0		85,108
Church		13,615		647		0		1,058		0		0		16,086		2,095		0		2,396		0		0		20,577
Construction		22,583		0		0		0		0		0		8,998		27,028		0		0		0		0		36,026
Commercial - other		46,973		0		0		0		0		0
SBA loans		39,078		0		0		0		0		0
Commercial - others														49,367		14,916		0		300		7		0		64,590
SBA														3,789		662		0		0		0		0		4,451
Consumer		73		0		0		0		0		0		51		0		0		0		0		0		51
Total	$	614,483	$	647	$	0	$	2,884	$	0	$	0	$	566,194	$	58,096	$	10,411	$	15,974	$	7	$	0	$	650,682

	December 31, 2020												December 31, 2021
	Pass		Watch		Special Mention		Substandard		Doubtful		Loss		Pass		Watch		Special Mention		Substandard		Doubtful		Loss		Total
	(In thousands)												(In thousands)
Single family	$	48,357	$	0	$	0	$	1	$	0	$	0	$	42,454	$	1,343	$	271	$	1,304	$	0	$	0	$	45,372
Multi-family		273,501		0		0		362		0		0		378,141		7,987		575		8,527		0		0		395,230
Commercial real estate		22,834		1,488		0		0		0		0		69,257		7,034		9,847		7,055		0		0		93,193
Church		12,899		657		0		2,752		0		0		20,021		0		0		2,482		0		0		22,503
Construction		430		0		0		0		0		0		10,522		21,550		0		0		0		0		32,072
Commercial - other		9		0		0		47		0		0		33,988		12,551		0		0		0		0		46,539
Consumer		7		0		0		0		0		0
SBA														18,665		0		172		0		0		0		18,837
Total	$	358,037	$	2,145	$	0	$	3,162	$	0	$	0	$	573,048	$	50,465	$	10,865	$	19,368	$	0	$	0	$	653,746

~~In 2015, CFC 45 was formed to, in effect, act as a pass-through entity for a Merrill Lynch NMTC Corp. (“Merrill Lynch”) allocation~~

Table of funds in connection with the Bank’s participation in the New Markets Tax Credit (“NMTC”) Program totaling $14.0 million. (See Note 8 - Borrowings.) The financial statements for CFC 45 are consolidated with those of the Company, and as such the Company has reflected a $14.0 million loan made by CFC 45 to a Qualified Active Low Income Business in gross loans above as of June 30, 2021, in connection with the NMTC Program.Contents

~~Table of Contents~~

~~BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY~~

~~Notes to Unaudited Consolidated Financial Statements~~

NOTE ~~(7)~~(6) – Goodwill and Intangible Assets

In connection with the CFBanc Merger ~~(See~~(see Note 2 - – Business ~~Combination.)~~Combination), the Company recognized ~~goodwill~~goodwill of $26.0 million and a core deposit intangible of $3.3 million. As the Company’s stock recently trading at a steep discount to tangible book value, an assessment of goodwill impairment was performed as of June 30, 2022, in which 0 impairment was determined. The following table presents the changes in the carrying amounts of goodwill ~~and core deposit intangibles~~ for the ~~three~~ ~~months~~six-month period ended June 30, ~~2021~~:2022:

	Goodwill		Core Deposit Intangible			Goodwill			Core Deposit Intangible
	(In thousands)					(In thousands)
Balance at the beginning of the period	$	0	$	0		$	25,996		$	2,936
Additions		25,996		3,329			0			0
Accretion		0		(131	)
Impairment		0		0
Change in deferred tax estimate							(138	)		0
Amortization							0			(217	)
Balance at the end of the period	$	25,996	$	3,198		$	25,858		$	2,719

The carrying amount of the core deposit intangible consisted of the following at June 30, ~~2021:~~2022 (in thousands):

Core deposit intangible acquired	$	3,329
Less: accumulated amortization		(610	)
	$	2,719

(In thousands)
Core deposit intangible acquired $ 3,329
Less: accumulated amortization (131 )

$ 3,198

The following table outlines the estimated amortization expense for the core deposit intangible during the next five fiscal ~~years:~~years (in thousands):

	(In thousands)
2021	$	262
2022		435	$	219
2023		390		390
2024		336		336
2025		315		315
2026				304
Thereafter		1,460		1,155
	$	3,198	$	2,719

NOTE ~~(8)~~(7) – Borrowings

T~~The~~he Bank enters into agreements under which it sells securities subject to an obligation to repurchase the same or similar securities. Under these arrangements, the Bank may transfer legal control over the assets but still retain effective control through an agreement that both entitles and obligates the Bank to repurchase the assets. As a result, these repurchase agreements are accounted for as collateralized financing agreements (i.e., secured borrowings) and not as a sale and subsequent repurchase of securities. The obligation to repurchase the ~~securities~~securities is reflected as a liability in the Banks’s consolidated statements of financial condition, w~~, while~~hile the securities underlying the repurchase agreements remain in the respective investment securities asset accounts. In other words, there is no offsetting or netting of the investment securities assets with the repurchase agreement liabilities. These agreements mature on a daily basis. As of June 30, 2022 securities sold under agreements to repurchase totaled $67.3 at an average rate of 0.22%. The market value of pledged totaled $72.7 million as of June 30, 2022, and included $35.1 million of U.S. Government Agency securities, $27.6 million of mortgage-backed securities, $6.2 million of SBA pool securities and $3.8 million of federal agency CMO. As of December 31, 2021, securities sold under agreements to repurchase totaled ~~$70.7~~$52.0 million at an average rate of 0.10%. The market value of securities pledged totaled ~~$71.9~~$53.2 million as of ~~June 30,~~December 31, 2021, and included ~~$17.8~~$13.3 million of U.S. Government Agency securities ~~$47.5~~and $39.9 million of mortgage-backed ~~securities, and $6.6 million of collateralized mortgage obligations.~~securities. ~~There were 0 securities pledged as of December 31, 2020.~~

At June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Bank had outstanding ~~Advances~~advances from the ~~Federal Home Loan Bank (“FHLB”)~~FHLB totaling ~~$96.0~~$32.9 million and ~~$110.5~~$86.0 million, respectively. The weighted ~~rate~~ interest rate was ~~1.95%~~1.34% and ~~1.94%~~1.85% as of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. The weighted average contractual maturity was 2632 months and 2722 months as of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. The advances were collateralized by loans with a market value of ~~$193.6~~$63.4 million at June 30, 2022 and $165.0 million at December 31, 2021. The Bank is currently approved by the FHLB of Atlanta to borrow up to 25% of total assets to the extent the Bank provides qualifying collateral and holds sufficient FHLB stock. Based on collateral pledged and FHLB stock as of June 30, ~~2021.~~2022, the Company was eligible to borrow an additional $13.8 million as of June 30, 2022.

2118

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~~BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY~~

~~Notes to Unaudited Consolidated Financial Statements~~

On March 17, 2004, the Company issued $6.0 million of Floating Rate Junior Subordinated Debentures (the “Debentures”) in a private placement to a trust that was capitalized to purchase subordinated debt and preferred stock of multiple community banks. Interest on the Debentures is payable quarterly at a rate per annum equal to the 3-Month LIBOR plus 2.54%. The interest rate is determined as of each March 17, June 17, September 17, and December 17, and was 2.69% at June 30, 2021. On October 16, 2014, the Company made payments of $900 thousand of principal on Debentures, executed a Supplemental Indenture for the Debentures that extended the maturity of the Debentures to March 17, 2024, and modified the payment terms of the remaining $5.1 million principal amount thereof. The modified terms of the Debentures require quarterly payments of interest only through March 2019 at the original rate of 3-Month LIBOR plus 2.54%. Starting in June 2019, the Company began making quarterly payments of equal amounts of principal, plus interest, and will continue until the Debentures are fully amortized on March 17, 2024. At June 30, 2021, the Company had repaid a total of $2.2 million of the scheduled principal. The Debentures may be called for redemption at any time by the Company.

In connection with the New Market Tax Credit activities of ~~City First~~the Bank, CFC 45 is a partnership whose members include CFNMA and City First New Markets Fund II, LLC. This ~~CDE~~community development entity (“CDE”) acts in effect as a pass-through for a Merrill Lynch allocation totaling $14.0 million that needed to be deployed. In December 2015, Merrill Lynch made a $14.0 million non-recourse loan to CFC 45, whereby CFC 45 passed that loan through to a Qualified Active Low-Income Business (“QALICB”). The loan to the QALICB is secured by a Leasehold Deed of Trust that, due to the pass-through, non-recourse structure, is operationally and ultimately for the benefit of Merrill Lynch rather than CFC 45. Debt service payments received by CFC 45 from the QALICB are passed through to Merrill Lynch in return for which CFC 45 receives a servicing fee. The financial statements of CFC 45 are consolidated with those of the Bank and the Company.

There are 2 notes for CFC 45. Note A is in the amount of $9.9 million with a fixed interest rate of 5.2% per annum. Note B is in the amount of $4.1 million with a fixed interest rate of 0.24% per annum. Quarterly interest only payments commenced in March 2016 and will continue through March 2023 for Notes A and B. Beginning in ~~June~~September 2023, quarterly principal and interest payments will be due for Notes A and B. Both notes will mature on December 1, 2040.

NOTE ~~(9)~~(8) – Fair Value

The Company used the following methods and significant assumptions to estimate fair value:

The fair values of securities available-for-sale are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or matrix pricing, which is a mathematical technique to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs).

The fair value of impaired loans that are collateral dependent is generally based upon the fair value of the collateral, which is obtained from recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

Assets acquired through or by transfer in lieu of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at the lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals which are updated every nine months. These appraisals may utilize a single valuation approach or a combination of approaches, including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Real estate owned properties are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

~~Table of Contents~~

~~BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY~~

~~Notes to Unaudited Consolidated Financial Statements~~

Appraisals for collateral-dependent impaired loans and assets acquired through or by transfer of in lieu of foreclosure are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. Once received, an independent third-party licensed appraiser reviews the appraisals for accuracy and reasonableness, reviewing the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics.

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Assets Measured on a Recurring Basis

Assets measured at fair value on a recurring basis are summarized below:

	Fair Value Measurement
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(In thousands)
At June 30, 2022:
Securities available-for-sale:
Federal agency mortgage-backed	$	0	$	83,102	$	0	$	83,102
Federal agency CMO		0		26,820		0		26,820
Federal agency debt		0		48,874		0		48,874
Municipal bonds		0		4,339		0		4,339
U.S. Treasuries		0		61,180		0		61,180
SBA pools		0		13,983		0		13,983

At December 31, 2021:
Securities available-for-sale:
Federal agency mortgage-backed	$	0	$	70,030	$	0	$	70,030
Federal agency CMO		0		9,287		0		9,287
Federal agency debt		0		37,988		0		37,988
Municipal bonds		0		4,915		0		4,915
U.S. Treasuries		0		17,951		0		17,951
SBA pools		0		16,225		0		16,225

Fair Value Measurement

Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant Unobservable
Inputs
(Level 3)
Total
(In thousands)
At June 30, 2021:

Securities available-for-sale – federal agency mortgage-backed $ 0 $ 84,256 $ 0 $ 84,256
Securities available-for-sale – federal agency debt 0 33,406 0 33,406
Municipal bonds 0 4,972 0 4,972
U. S. Treasuries 0 18,215 0 18,215
SBA pools 0 17,983 0 17,983

At December 31, 2020:

Securities available-for-sale – federal agency mortgage-backed $ 0 $ 5,807 $ 0 $ 5,807
Securities available-for-sale – federal agency debt 0 2,872 0 2,872
Municipal bonds 0 2,019 0 2,019

There were 0no transfers between Level 1, Level 2, or Level 3 during the three and six months ended June 30, ~~2021~~2022 and ~~2020.~~2021.

Assets Measured on a Non-Recurring Basis

Assets are considered to be reflected at fair value on a non-recurring basis if the fair value measurement of the instrument does not necessarily result in a change in the amount recorded on the statements of financial condition. Generally, a non-recurring valuation is the result of the application of other accounting pronouncements that require assets to be assessed for impairment or recorded at the lower of cost or fair value.

As of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Bank did 0t have any impaired loans carried at fair ~~value of collateral.~~value.

2320

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~~BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY~~

~~Notes to Unaudited Consolidated Financial Statements~~

Fair Values of Financial Instruments

The following tables present the carrying amount, fair value, and placement in the fair value hierarchy of the Company’s financial instruments not recorded at fair value on a recurring basis as of June 30, ~~2021~~2022 and December 31, ~~2020. This table excludes financial instruments for which the carrying amount approximates fair value.~~2021. For short-term financial assets such as cash and due from banks, interest-bearing deposits in other banks, and accrued interest receivable/payable, the carrying amount is a reasonable estimate of fair value due to the relatively short time between the origination of the instrument and its expected realization. For non-marketable equity securities such as Federal Home Loan Bank stock, the carrying amount is a reasonable estimate of fair value as these securities can only be redeemed or sold at their par value and only to the respective issuing government supported institution or to another member institution. For financial liabilities such as noninterest-bearing demand, interest-bearing demand, and savings deposits, the carrying amount is a reasonable estimate of fair value due to these products having no stated maturity.

			Fair Value Measurements at June 30, 2021										Fair Value Measurements at June 30, 2022
	Carrying Value		Level 1		Level 2		Level 3		Total		Carrying Value		Level 1		Level 2		Level 3		Total
	(In thousands)										(In thousands)
Financial Assets:
Cash and cash equivalents	$	210,383	$	210,383	$	0	$	0	$	210,383	$	280,137	$	280,137	$	0	$	0	$	280,137
Securities available-for-sale		158,832		0		158,832		0		158,832		238,298		0		238,298		0		238,298
Loans receivable held for investment		614,718		0		0		612,712		612,712		646,868		0		0		607,927		607,927
Accrued interest receivables		2,572		206		282		2,084		2,572		2,694		162		475		2,057		2,694
Bank owned life insurance		3,168		3,168		0		0		3,168		3,211		3,211		0		0		3,211

Financial Liabilities:
Deposits	$	705,041	$	0	$	705,199	$	0	$	705,199	$	816,177	$	0	$	731,780	$	0	$	731,780
Federal Home Loan Bank advances												32,932		0		31,581		0		31,581
Securities sold under agreements to repurchase		70,660		0		70,063		0		70,063		67,292		0		62,716		0		62,716
Federal Home Loan Bank advances		96,022		0		98,160		0		98,160
Junior subordinated debentures		2,805		0		0		2,344		2,344
Note payable		14,000		0		0		14,000		14,000		14,000		0		0		14,000		14,000
Accrued interest payable		104		0		104		0		104		241		0		241		0		241

			Fair Value Measurements at December 31, 2020
	Carrying Value		Level 1		Level 2		Level 3		Total				Fair Value Measurements at December 31, 2021
	(In thousands)										Carrying Value		Level 1		Level 2		Level 3		Total
											(In thousands)
Financial Assets:
Cash and cash equivalents	$	96,109	$	96,109	$	0	$	0	$	96,109	$	231,520	$	231,520	$	0	$	0	$	231,520
Securities available-for-sale		10,698		0		10,698		0		10,698		156,396		0		156,396		0		156,396
Loans receivable held for investment		360,129		0		0		366,279		366,279		648,513		0		0		623,778		623,778
Accrued interest receivables		1,202		60		14		1,128		1,202		3,372		19		1,089		2,264		3,372
Bank owned life insurance		3,147		3,147		0		0		3,147		3,190		3,190		0		0		3,190

Financial Liabilities:
Deposits	$	315,630	$	0	$	312,725	$	0	$	312,725	$	788,052	$	0	$	754,181	$	0	$	754,181
Federal Home Loan Bank advances		110,500		0		113,851		0		113,851		85,952		0		87,082		0		87,082
Junior subordinated debentures		3,315		0		0		2,798		2,798
Securities sold under agreements to repurchase												51,960		0		51,960		0		51,960
Note payable												14,000		0		0		14,000		14,000
Accrued interest payable		88		0		84		4		88		119		0		119		0		119

In accordance with ASU No. 2016-01, the fair value of ~~certain~~ financial assets and liabilities ~~including loans, time deposits, and junior subordinated debentures, as of June 30, 2021 and December 31, 2020~~ was measured using an exit price notion. Although the exit price notion represents the value that would be received to sell an asset or paid to transfer a liability, the actual price received for a sale of assets or paid to transfer liabilities could be different from exit price disclosed.

~~Table of Contents~~

~~BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY~~

~~Notes to Unaudited Consolidated Financial Statements~~

NOTE ~~(10)~~(9) – Stock-based Compensation

The Long-Term Incentive Plan, which was adopted by the Company and approved by the stockholders in 2018 (the “LTIP”), permits the grant of non-qualified and incentive stock options, stock appreciation rights, full value awards and cash incentive awards. The plan is in effect for ten years. The maximum number of shares that can be awarded under the plan is 1,293,109 shares of common stock as of December 31, 2018. As of June 30, ~~2021, 490,007~~2022, 949,362 shares had been awarded and ~~803,102~~343,747 shares are available under the ~~2018~~ LTIP.

AtDuring February of 2022 and 2021, the Company issued 47,187 and 20,736 shares of stock, respectively, to its directors under the 2018 LTIP, which were fully vested. The Company recorded $0 and $84 thousand of compensation expense during the three and six months ended June 30, 2022, respectively, based on the fair value of the stock, which was determined using the fair value of the stock on the date of the award. During the three and six months ended June 30, 2021, ~~0 restricted stock awards were outstanding, and during the~~ ~~first half of June 2021~~, the Company ~~did 0t grant any restricted~~recorded $0 and $45 thousand of stock ~~awards~~compensation expense.

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During March of 2022, the Company issued 495,262 shares to its officers and ~~employees.~~employees under the 2018 LTIP. Each restricted stock award is valued based on the fair value of the stock on the date of the award. These awarded shares of restricted stock fully vest over periods ranging from 36 months to 60 months from their respective dates of grant. Stock based compensation is recognized on a straight-line basis over the vesting period. There were 0 shares issued to officers and employees during 2021. During the three- and six-month periods ending June 30, 2022, the company recorded $43 thousand and $58 thousand of stock-based compensation expense, respectively. During the three- and six-month periods ending June 30, 2021, the company recorded $0 thousand and $162 thousand of stock-based compensation expense, respectively, related to awards granted prior to 2021.

NoNaN stock options were granted during the six months ended June 30, ~~2021~~2022 and ~~2020.~~2021.

The following table summarizes stock option activity during the six months ended June ~~2021~~30, 2022 and ~~2020:~~2021:

	Six Months Ended June 30, 2021				Six Months Ended June 30, 2020					June 30, 2022					June 30, 2021
	Number Outstanding		Weighted Average Exercise Price		Number Outstanding			Weighted Average Exercise Price		Number Outstanding			Weighted Average Exercise Price		Number Outstanding			Weighted Average Exercise Price
Outstanding at beginning of period		450,000	$	1.62		455,000		$	1.67		450,000		$	1.62		455,000		$	1.67
Granted during period		0		0		0			0		0			0		0			0
Exercised during period		0		0		0			0		0			0		0			0
Forfeited or expired during period		0		0		(5,000	)		6.00		(200,000	)		0		(5,000	)		6.00
Outstanding at end of period		450,000	$	1.62		450,000		$	1.62		250,000		$	1.62		450,000		$	1.62
Exercisable at end of period		450,000	$	1.62		360,000		$	1.62		250,000		$	1.62		360,000		$	1.62

The Company did 0t record any stock-based compensation expense related to ~~sto~~ckstock options during the three and six months ended June 30, ~~2021~~2022 since these stock options became fully vested and all compensation ~~cost~~expense was recognized in February 2021. For the three and six months ended June 30, 2021, the Company recorded $0 and $7 thousand expense related to stock ~~options. During the three and six months ended June 30, 2020, the Company recorded $10 thousand and $19 thousand of stock-based compensation expense related to stock~~ options, ~~respectively~~respectively..

Options outstanding and exercisable at June 30, ~~2021~~2022 were as follows:

Outstanding Exercisable
Grant Date
Number
Outstanding

Weighted
Average
Remaining
Contractual
Life

Weighted
Average
Exercise
Price

Aggregate
Intrinsic
Value

Number
Outstanding

Weighted
Average
Exercise
Price

Aggregate
Intrinsic
Value

February 24, 2016 450,000 4.65 years $ 1.62 450,000 $ 1.62
450,000 4.65 years $ 1.62 $ 481,500 450,000 $ 1.62 $ 481,500

Outstanding							Exercisable
Number Outstanding		Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Aggregate Intrinsic Value		Number Outstanding		Weighted Average Exercise Price		Aggregate Intrinsic Value
	250,000	3.63 years	$	1.62				250,000	$	1.62
	250,000	3.63 years	$	1.62	$	0		250,000	$	1.62	$	0

2522

Table of Contents

~~BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY~~

~~Notes to Unaudited Consolidated Financial Statements~~

NOTE ~~(11)~~(10) – ESOP Plan

Employees participate in an Employee Stock Option Plan (“ESOP”) after attaining certain age and service requirements. In December 2016, the ESOP purchased 1,493,679 shares of the Company’s common stock at $1.59 per share, for a total cost of $2.4 million, of which $1.2 million was funded with a loan from the Company. The loan will be repaid from the Bank’s annual discretionary contributions to the ESOP, net of dividends paid, over a period of 20 years. Shares of the Company’s common stock purchased by the ESOP are held in a suspense account until released for allocation to participants. When loan payments are made, shares are allocated to each eligible participant based on the ratio of each such participant’s compensation, as defined in the ESOP, to the total compensation of all eligible plan participants. As the unearned shares are released from the suspense account, the Company recognizes compensation expense equal to the fair value of the ESOP shares during the periods in which they become committed to be released. To the extent that the fair value of the ESOP shares released differs from the cost of such shares, the difference is charged or credited to equity as additional paid-in capital. Any dividends on allocated shares increase participant accounts. Any dividends on unallocated shares will be used to repay the loan. Participants will receive shares for their vested balance at the end of their employment. Compensation expense related to the ESOP was ~~$25~~$27 thousand and ~~$15~~$25 thousand for the three months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively, and ~~$47~~$45 thousand and ~~$32~~$47 thousand for the six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

Shares held by the ESOP were as follows:

	June 30, 2021		December 31, 2020		June 30, 2022		December 31, 2021
	(Dollars in thousands)				(Dollars in thousands)

Allocated to participants		1,051,088		1,065,275		1,062,326		1,065,275
Committed to be released		30,708		10,236		30,192		10,236
Suspense shares		541,919		562,391		501,490		562,391
Total ESOP shares		1,623,715		1,637,902		1,594,008		1,637,902
Fair value of unearned shares	$	1,458	$	1,040	$	532	$	1,040

At June 30, 2021, 30,708 of ESOP shares were committed to be allocated to participants during 2021. During 2021 and 2020, 41,665 and 43,321 of ESOP shares were released for allocation to participants, respectively. Unearned shares, which are reported as Unearned ESOP shares in the equity section of the consolidated statements of financial condition, were ~~$861~~$797 thousand and ~~$893~~$829 thousand at June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

NOTE ~~(12)~~(11) – Stockholders’ Equity and Regulatory Matters

On June 7, 2022, the Company issued 150,000 shares of Senior Non-Cumulative Perpetual Preferred stock, Series C (“Series C Preferred Stock”), for the capital investment of $150.0 million from the U.S. Treasury under the Emergency Capital Investment Program (“ECIP”). ECIP investment is treated as Tier 1 Capital for the regulatory capital treatment.

The Series C Preferred stock may be redeemed at the option of the Company on or after the fifth anniversary of issuance (or earlier in the event of loss of regulatory capital treatment), subject to the approval of the appropriate federal banking regulator in accordance with the federal banking agencies’ regulatory capital regulations.

The initial dividend rate of the Series C Preferred Stock is 0percent for the first two years after issuance, and thereafter the floor dividend rate is 0.50% and the ceiling dividend rate is 2.00%.

During the first quarter of 2022 the Company completed the exchange of all the Series A Fixed Rate Cumulative Redeemable Preferred Stock, with an aggregate liquidation rate of $3 million, plus accrued dividends, for 1,193,317 shares of Class A Common Stock at an exchange price of $2.51 per share of Class A Common Stock.

The Bank’s capital requirements are administered by the Office of the Comptroller of the Currency (“OCC”) and involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by the OCC. Failure to meet capital requirements can result in regulatory action.

As a result of the Economic Growth, Regulatory Relief, and Consumer Protection Act, the federal banking agencies have developed a “Community Bank Leverage Ratio” (“CBLR”) (the ratio of a bank’s tier 1 capital to average total consolidated assets) for financial institutions with assets of less than $10 billion. A “qualifying community bank” that exceeds this ratio will be deemed to be in compliance with all other capital and leverage requirements, including the capital requirements to be considered “well capitalized” under Prompt Corrective Action statutes. The federal banking agencies have set the Community Bank Leverage Ratio at 9%. The CARES Act temporarily lowered this ratio to 8% beginning in the three months ended ~~June 30,~~March 31, 2020. The ratio then rose to 8.5% for 2021 and ~~reestablishes~~was reestablished at 9% on January 1, 2022.

~~Table of Contents~~

~~BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY~~

~~Notes to Unaudited Consolidated Financial Statements~~

City First Bank, N.A. elected to adopt the CBLR option on April 1, 2020, as reflected in its ~~June 30,~~March 31, 2020 Call Report. Its CBLR as of June 30, 2021 is shown in the table below. The Company’s former subsidiary, Broadway Federal Bank, f.s.b., did not elect to adopt the CBLR and reported the December 31, 2020 capital ratios as shown in the table below.

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Actual and required capital amounts and ratios as of the ~~periods~~dates indicated are presented below.

Actual
Minimum Capital
Requirements

Minimum Required to
Be Well Capitalized
Under Prompt
Corrective Action
Provisions

Amount Ratio Amount
Ratio
Amount Ratio
(Dollars in thousands)
June 30, 2021:

Community Bank Leverage Ratio ⁽¹⁾
$ 97,639 10.10 % $

$ 82,171 8.50 %
December 31, 2020:

Tier 1 (Leverage) $ 46,565 9.54 % $ 19,530 4.00 % $ 24,413 5.00 %
Common Equity Tier 1 $ 46,565 18.95 % $ 11,059 4.50 % $ 15,975 6.50 %
Tier 1 $ 46,565 18.95 % $ 14,746 6.00 % $ 19,661 8.00 %
Total Capital $ 49,802 20.20 % $ 19,661 8.00 % $ 24,577 10.00 %

	Actual					Minimum Required to Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
June 30, 2022:
Community Bank Leverage Ratio	$	171,773		15.87	%	$	92,005		9.00	%
December 31, 2021:
Community Bank Leverage Ratio	$	98,590		9.32	%	$	89,871		8.50	%

⁽¹⁾

^{At the Merger on April 1, 2021, the Company’s former subsidiary, Broadway Federal Bank, f.s.b., was merged into City First Bank of D.C, N. A., with City First Bank of D.C, N.A. as the surviving entity and the resultant bank being named City First Bank, National Association, which had elected to adopt Community Bank Leverage Ratio option on April 1, 2020 as reflected in its June 30, 2020 Call Report.}

At June 30, ~~2021,~~2022, the Company and the Bank met all the capital adequacy requirements to which they were subject. In addition, the Bank was “well capitalized” under the regulatory framework for prompt corrective action. Management believes that no conditions or events have occurred since ~~December 31, 2020~~June 30, 2022 that would materially adversely change the Bank’s capital classifications. From time to time, wethe Bank may need to raise additional capital to support ~~the Bank’s~~its further growth and to maintain ~~the~~its “well capitalized” status.

NOTE ~~(13)~~(12) – Income Taxes

The Company and its subsidiary are subject to U.S. federal and state income taxes. Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit ~~carry-forwards.~~carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all, of the deferred tax asset will not be realized. In assessing the realization of deferred tax assets, management evaluated both positive and negative evidence, including the existence of cumulative losses in the current year and the prior two years, the amount of taxes paid in available carry-back years, the forecasts of future income and tax planning strategies.

~~The~~ At June 30, 2022, the Company ~~recorded~~maintained a ~~$370~~$369 thousand ~~impairment~~valuation allowance on its deferred tax assets ~~during the three months ended June 30, 2021~~ because the number of shares sold in the private placements completed on April 6, 2021 triggered limitations on the use of certain tax attributes under the Section 382 of the federal tax code. The ability to use net operating losses (“NOLs”) to offset future taxable income will be restricted and these NOLs could expire or otherwise be unavailable. In general, under Section 382 of the Code and corresponding provisions of state law, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change NOLs to offset future taxable income. For these purposes, an ownership change generally occurs where the aggregate stock ownership of one or more stockholders or groups of stockholders who owns at least 5% of a corporation’s stock increases its ownership by more than 50 percentage points over its lowest ownership percentage within a specified testing period.

2724

Table of Contents

~~BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY~~

~~Notes to Unaudited Consolidated Financial Statements~~

NOTE ~~(14)~~(13) – Concentration of Credit Risk

The Bank has a significant concentration of deposits with 1 customer that accounted for approximately 9%16% of its deposits as of June 30, ~~2021.~~2022. The Bank also has a significant concentration of ~~short term~~short-term borrowings from 1 customer that accounted for 80% of the outstanding balance of securities sold under agreements to repurchase as of June 30, ~~2021.~~2022. The Bank expects to maintain the relationships with these customers for the foreseeable future.

2825

Table of Contents

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results. Our MD&A should be read in conjunction with the Consolidated Financial Statements and related Notes included in Part I “Item 1, Financial Statements,” of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021. Certain statements herein are forward-looking statements within the meaning of Section 21E of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Section 27A of the U.S. Securities Act of 1933, as amended that reflect our current views with respect to future events and financial performance. Forward-looking statements typically include words such as “anticipate,” “believe,” “estimate,” “expect,” “project,” “plan,” “forecast,” “intend,” and other similar expressions. These forward-looking statements are subject to risks and uncertainties, which could cause actual future results to differ materially from historical results or from those anticipated or implied by such statements. Readers should not place undue reliance on these forward-looking statements, which speak only as of their dates or, if no date is provided, then as of the date of this Form 10-Q. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent required by law.

Critical Accounting Policies and Estimates

~~Our significant~~

Critical accounting policies ~~which~~ are ~~essential~~those that involve a significant level of estimation uncertainty and have had or are reasonably likely to ~~understanding MD&A,~~have a material impact on our financial condition or results of operations under different assumptions and conditions. This discussion highlights those accounting policies that management considers critical. All accounting policies are ~~described~~important; however, and therefore you are encouraged to review each of the policies included in Note 1 “Summary of Significant Accounting Principles” of the ~~“Notes~~Notes to Consolidated Financial ~~Statements”~~Statements in our 2021 Form 10-K to gain a better understanding of how our financial performance is measured and reported. Management has identified the Company’s critical accounting policies as follows:

Allowance for Loan Losses

The determination of the allowance for loan losses (“ALLL”) is considered critical due to the high degree of judgment involved, the subjectivity of the underlying assumptions used, and the potential for changes in the ~~“Critical Accounting Policies” section~~economic environment that could result in material changes in the amount of ~~MD&A~~the allowance for loan losses considered necessary. The allowance is evaluated on a regular basis by management and the Board of Directors and is based on a periodic review of the collectability of the loans in ~~our Annual~~light of historical experience, the nature and size of the loan portfolio, adverse situations that may affect borrowers’ ability to repay, the estimated value of any underlying collateral, prevailing economic conditions, and feedback from regulatory examinations.

Business Combinations

Business combinations are accounted for using the acquisition accounting method. Under the acquisition method, the Company measures the identifiable assets acquired, including identifiable intangible assets, and liabilities assumed in a business combination at fair value on the acquisition date. Goodwill is generally determined as the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Changes to the acquisition date fair values of assets acquired and liabilities assumed may be made as adjustments to goodwill over a 12-month measurement period following the date of acquisition. Such adjustments are attributable to additional information obtained related to fair value estimates of the assets acquired and liabilities assumed.

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Acquired Loans

Acquired loans that are not considered to be PCI loans are recognized at fair value at the acquisition date, with the resulting credit and non-credit discount or premium being amortized or accreted into interest income using the level yield method. Acquired loans that in management’s judgement have shown evidence of deterioration in credit quality since origination are classified as PCI loans. Factors that indicate a loan may have shown evidence of credit deterioration include delinquency, downgrades in credit rating, non-accrual status, and other negative factors identified by management at the time of initial assessment. The Company estimates the amount and timing of expected cash flows for each PCI loan, and the expected cash flows in excess of the allocated fair value is recorded as interest income over the remaining life of the loan (accretable yield). The excess of the loan’s contractual principal and interest over expected cash flows is not recorded (non-accretable difference). Over the life of the PCI loan, expected cash flows continue to be estimated each quarter. If the present value of expected cash flows decreases from the prior estimate, a provision for loan losses is recorded and an allowance for loan losses is established. If the present value of expected cash flows increases from the prior estimate, the increase is recognized as part of future interest income.

The estimates used to determine the fair values of non-PCI and PCI acquired loans can be complex and require significant judgment regarding items such as default rates, timing and amount of future cash flows, prepayment rates and other factors.

Goodwill and Intangible Assets

Income Taxes

Deferred tax assets and liabilities are determined using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is determined based on the tax effects of the temporary differences between the book and tax bases of the various balance sheet assets and liabilities and gives current recognition to changes in tax rates and laws. A valuation allowance is established against deferred tax assets when, based upon the available evidence including historical and projected taxable income, it is more likely than not that some or all the deferred tax asset will not be realized. In assessing the realization of deferred tax assets, management evaluates both positive and negative evidence, including the existence of any cumulative losses in the current year and the prior two years, the amount of taxes paid in available carry‑back years, forecasts of future income and available tax planning strategies. This analysis is updated quarterly.

Fair Value Measurements

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

Fair values are estimated using relevant market information and other assumptions, as more fully disclosed in Note 8 of the Notes to Consolidated Financial Statements of this Quarterly Report on Form ~~10-K for the year ended December 31, 2020.~~

~~As a result~~10-Q. Fair value estimates involve uncertainties and matters of the Company’s acquisition of CFBanc Corporation on April 1, 2021, the accounting policy related to business combinations has been added to our critical accounting policies during the six months ended June 30, 2021. See Note 1 - Basis of Financial Statement Presentationsignificant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the ~~accompanying Notes to Unaudited Consolidated Financial Statements contained~~absence of broad markets for items. Changes in ~~Item 1. Consolidated Financial Statements (Unaudited).~~

assumptions or in market conditions could significantly affect the estimates.

~~COVID-19 Pandemic Impact~~

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~~The Company continues to monitor the impact of the lingering COVID-19 pandemic on its operations. To date, the Bank has not implemented layoffs or furloughs of any employees because of the pandemic.~~

Although the Bank developed plans and policies for providing financial relief to borrowers that may experience difficulties in meeting the terms of their loans, as of June 30, 2021, none of its borrowers had requested loan modifications and the Bank had no delinquencies related to COVID-19.

As of June 30, 2021, the Company participated in the Small Business Administration’s (“SBA”) Paycheck Protection Program (“PPP”) by way of its merger with CFBanc Corporation. The Bank originated $26.4 million in PPP loans during the three months ended June 30, 2021.

Overview

Broadway Financial Corporation (the “Company”) merged with CFBanc Corporation (“CFBanc”) on April 1, ~~2021,~~2022, with Broadway Financial Corporation continuing as the surviving entity (the “CFBanc Merger”). Immediately following the CFBanc Merger, Broadway Federal Bank, f.s.b. merged with and into City First Bank of D.C, National Association with City First Bank of D.C., National Association continuing as the surviving entity (which concurrently changed its name to City First Bank, National Association). The results for the three months ended June 30, ~~2021~~2022 reflect the contribution of the consolidated operations of CFBanc Corporation. Accordingly, results for the ~~second quarter~~three- and six-month periods ending June 30, 2022 and for the three months ended June 30, 2021, include the operations of Broadway Financial Corporation and its subsidiary, City First Bank, National Association (the “Bank”), whereas results for the ~~first quarter of~~six months ending June 30, 2021 ~~and the first half of 2020~~ include the results of Broadway Financial Corporation and its former subsidiary, Broadway Federal Bank, f.s.b., which was merged into City First Bank of D.C., National Association on April 1, ~~2021 and the resultant bank was renamed City First Bank, National Association.~~2022.

~~Table~~The Company closed a private placement of ~~Contents~~shares of the Company’s Senior Non-Cumulative Perpetual Preferred Stock, Series C (“Series C Preferred Stock”), pursuant to a Purchase Agreement with the United States Department of the Treasury (the “Purchaser”) as part of the Emergency Capital Investment Program (“ECIP”), which has provided funding to Minority Depository Institutions and Community Development Financial Institutions to increase access to capital for underserved communities that may have been disproportionately impacted by the economic effects of the COVID-19 pandemic. The Series C Preferred Stock will be classified within stockholders’ equity of the statement of financial condition. Pursuant to the Purchase Agreement, the Purchaser acquired an aggregate of 150,000 shares of Series C Preferred Stock for an aggregate purchase price equal to $150.0 million in cash, which is intended to qualify as Tier 1 Capital. The initial dividend rate of the Series C Preferred Stock is zero percent for the first two years after issuance, and thereafter the floor dividend rate is 0.50% and the ceiling dividend rate is 2.00%. The dividend rate is based on annual change in actual qualified lending relative to a baseline level of qualified lending. The Series C Preferred stock may be redeemed at the option of the Company on or after the fifth anniversary of issuance (or earlier in the event of loss of regulatory capital treatment), subject to the approval of the appropriate federal banking regulator in accordance with the federal banking agencies’ regulatory capital regulations.

Total assets increased by ~~$557.6~~$130.7 million during the first six months of 2022 to ~~$1.041~~$1.224 billion at June 30, ~~2021~~2022, primarily due to growth in cash and cash equivalents of $48.6 million, growth in investment securities available-for-sale of $81.9 million, and a net increase in the deferred tax asset of $2.9 million. This was partially offset by decreases of $1.6 million in loans and $1.1 million in FHLB stock.

Total liabilities decreased by $12.9 million to $939.5 million at June 30, 2022 from ~~$483.4~~$952.4 million at December 31, ~~2020.~~2021. The increase in total assets was primarily due to the merger, which increased total assets by $501.2 million for the period. The increase in total assets was also the result of loan originations of $89.1 million for the six months ended June 30, 2021.

~~Total liabilities increased by $463.0 million to $897.5 million at June 30, 2021 from $434.5 million at December 31, 2020. The increase~~decrease in total liabilities primarily consisted of ~~the assumption~~decreases of ~~$353.7 million of deposits, $3.2 million of~~$53.0 in FHLB advances and ~~$73.9~~$3.4 million in other liabilities, which were partially offset by net increases in securities sold under agreements to repurchase of ~~other borrowings~~$15.3 million and $28.1 million in ~~the CFBanc Merger.~~deposits.

WeDuring the second quarter of 2022, we recorded net income of $701 thousand and a net loss of $2.8 million for the three and six months ended June 30, 2021, respectively, compared to net income of $216 thousand and $183 thousand for the three and six months ended June 30, 2020, respectively.

~~Our net~~interest income increased by ~~$485~~$2.2 million or 38.1% compared to the second quarter of 2021. This increase resulted from an increase in the average balance of interest-earning assets, primarily from the investment of funds from the Bank’s general liquidity. Interest income was also positively impacted by an increase in the average rates earned on interest-earning assets. The Company contributed $75 million of the proceeds from the sale of the Series C Preferred Stock to Bank which reduced the Bank’s multi-family and commercial real estate loan concentration levels. This also reduced the risk associated with the qualitative factors used to estimate the required ALLL as of June 30, 2022. As a result, the Bank recorded a loan loss provision recapture of $577 thousand for the second quarter of 2022.

Partially offsetting these improvements were a decrease in non-interest income of $1.9 million and an increase in non-interest expenses of $892 thousand during the three months ended June 30, ~~2021~~2022, compared to the ~~three months ended June 30, 2020 primarily due to an increase~~same period in 2021. Non-interest income for the second quarter of ~~$2.7 million, or 89.4%, in net interest income after loan loss provision, and~~2021 included a ~~grant award~~non-recurring benefit of $1.8 million from a grant from the ~~U.S.~~United States Department of the Treasury’s Community Development Financial Institution (“CDFI”) Fund. ~~Results for~~Non-interest expenses increased during the second quarter ~~were negatively impacted by an increase in non-interest expenses as a result~~ of 2022 compared to the ~~merger,~~second quarter of 2021 primarily due to higher compensation and ~~an effective tax rate of 71.3%, which reflected changes in assumptions for the Company’s estimated annualized tax expense~~benefits costs, professional services costs, and an increase of $370 thousand in the valuation allowance on the Company’s deferred tax assets. The issuance of 18,474,000 shares of common stock in the private placements that closed a few days after the Merger triggered a limitation on the use of the Company’s deferred tax assets. As previously disclosed in the Company’s filings with the U.S. Securities and Exchange Commission (the “SEC”), the Company raised $32.9 million in gross proceeds from the sale of common stock in the private placements in the three months ended June 30, 2021. Net proceeds after expenses were $30.8 million.information services costs.

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For the six months ended June 30, ~~2021,~~2022, the Company reported net income of $2.8 million compared to a net loss of $2.8 million ~~compared to net income of $183 thousand~~ for the six months ended June 30, ~~2020.~~2021. Merger-related costs of $5.6 million were recorded during the six months ended June 30, 2021, which significantly impacted the results. The Company’s results for the ~~period. However, during the~~first six months ~~ended June 30,~~of 2021 ~~net interest income increased by $2.7 million, and a gain~~reflect the consolidated operations of $1.8 million was recognized from the grant from the CDFI Fund discussed above. These increases were offset by an increase in non-interest expenses of $7.5 million, which included the merger-related costs discussed above and the inclusion of the non-interest expenses of CFBancCFB after the ~~merger date.~~Merger on April 1, 2021.

Results of Operations

Net Interest Income

Three Months Ended June 30, ~~2021~~2022 Compared to the Three Months Ended June 30, 2021

Net interest income before loan loss ~~provisions~~provision for the ~~three months ended June 30, 2021~~second quarter of 2022 totaled ~~$5.8~~$8.0 million, ~~compared to $3.0~~representing an increase of $2.2 million, or 38.1%, over net interest income before loan loss provision of $5.8 million for the ~~three months ended June 30, 2020.~~second quarter of 2021. The increase ~~primarily~~ resulted from ~~an increase in~~additional interest income, primarily generated from growth of ~~$2.3~~$69.3 million in average interest-earning assets during the ~~three months ended June 30, 2021 due to the higher interest income and fees on loans receivable~~second quarter of $1.9 million and interest on investment securities of $375 thousand. These increases were primarily the result of the CFBanc Merger. Total interest expense decreased during the period by $474 thousand to $1.1 million for the three months ended June 30, 2021, compared to $1.5 million for the three months ended June 30, 2020. The decrease was largely due to the decrease in interest expense on interest bearing deposits, which decreased by $490 thousand2022, compared to the ~~same period~~second quarter of 2021. Net interest income in the ~~prior year as a result~~second quarter of 2022 also benefited from a reduction in the overall rates ~~offered~~paid on ~~deposit accounts during the period. The cost~~interest-bearing liabilities of ~~interest bearing deposits for the three months ended June~~ 30 2021, was 0.30% compared to 1.17% for the three months ended June 30, 2020. The net interest margin for the three months ended June 30, 2021 was 2.33%, compared to 2.43% for the three months ended June 30, 2020, a change of 10 basis points.

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Interest income and fees on loans receivable increased by ~~$1.9~~$579 thousand, or 9.2%, to $6.9 million tofor the second quarter of 2022, from $6.3 million for the ~~three months ended June 30,~~second quarter of 2021 ~~from $4.4 million for the three months ended June 30, 2020~~ due to an increase of ~~$166.6~~$45.9 million in the average balance of loans receivable, which increased interest income by ~~$1.7 million. The~~$480 thousand, and an increase of 6 basis points in the average yield on loans, ~~also increased by 13 basis points from the three months ended June 30, 2020 to the three months ended June 30, 2021,~~ which increased interest income by ~~$159~~$99 thousand.

Interest income on securities increased by ~~$375~~$394 thousand, or 89.5%, for the ~~three months ended June 30, 2021~~second quarter of 2022, compared to the ~~three months ended June 30, 2020.~~second quarter of 2021. The increase in interest income on securities ~~was the result of~~primarily resulted from an increase ~~in the average balance~~ of securities of $148.2 million due to the addition of the securities in the CFBanc Merger. The higher average balance of securities increased interest income by $430 thousand. This increase was partially offset by the effects of a decrease of 13856 basis points in the average interest rate earned on securities, which ~~decreased~~increased interest income by ~~$55~~$261 thousand, and an increase of $40.9 million in the average balance of securities, which increased interest income by $133 thousand.

Other interest income increased by ~~$70~~$644 thousand, ~~for~~or 447.2%, during the ~~three months ended June 30, 2021~~second quarter of 2022 compared to the ~~three months ended June 30, 2020. The increase was~~second quarter of 2021. Interest income on interest-earning cash in other banks increased by $679 thousand primarily due to an increase of 130 basis points in the average ~~balance of~~ interest ~~earnings~~rate earned on cash deposits, which increased interest income by $684 thousand, and was partially offset by a decrease of ~~$186.6~~$16.1 million in average cash deposits, which ~~resulted in an~~decreased interest income by $5 thousand. This net increase was partially offset by a decrease of ~~$79~~$35 thousand in ~~other interest income. Other interest~~dividend income ~~was also positively impacted by an increase in~~on Federal Home Loan Bank (“FHLB”) and Federal Reserve Board (“FRB”) stock between the yield of FRB and FHLB stock, which increased to 7.14% for the three months ended June 30, 2021 compared to 3.18% for the three months ended June 30, 2020, resulting in an increase in other interest income of $40 thousand. Offsetting these increases was a reduction in the yield earned on interest earning deposits of 33 basis points, from 0.46% for the three months ended June 30, 2020, to 0.13% for the three months ended June 30, 2021. This decrease resulted in a reduction of other interest income of $54 thousand.two periods.

Interest expense on deposits decreased by ~~$490~~$128 thousand, or 26.8%, for the ~~three months ended June 30, 2021,~~second quarter of 2022, compared to the ~~three months ended June 30, 2020.~~second quarter of 2021. The decrease was attributable to a decrease of 8711 basis points in the average rate paid on deposits due to increases in non-interest bearing and lower rate deposits, which caused interest expense on deposits to decrease by ~~$797~~$203 thousand. This decrease was partially offset by an increase of $114.1 million in the average balance of deposits, which increased interest expense by $75 thousand.

Interest expense on borrowings decreased by $472 thousand, or 80.5%, for the second quarter of 2022, compared to the second quarter of 2021. Interest expense on FHLB advances decreased by $464 thousand between the two periods due to a decrease of $71.5 million in the average balance of FHLB advances, which decreased interest expense by $247 thousand, and a decrease of 112 basis points in the average rate paid, which decreased interest expense by $217 thousand. Interest expense on the Company’s junior subordinated debentures decreased by $21 thousand between the two periods because the Company paid off its junior subordinated debentures in the third quarter of 2021. The debentures averaged $3.1 million during the second quarter of 2021 at an average rate of 2.67%. Interest expense on other borrowings increased by $13 thousand between the two periods. The average rate on other borrowings increased by 8 basis points, which increased interest expense by $14 thousand, while the average balance decreased by $5.8 million, which decreased interest expense by $1 thousand.

The net interest margin increased to 3.00% for the second quarter of 2022 from 2.33% for the second quarter of 2021.

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Six Months Ended June 30, 2022 Compared to the Six Months Ended June 30, 2021

Net interest income before loan loss provision for the six months ended June 30, 2022, totaled $15.2 million, representing an increase of $6.5 million, or 75.5%, over net interest income before loan loss provision of $8.7 million for the six months ended June 30, 2021. Results for the first half of 2021 reflect the consolidated operations of CFB after the Merger on April 1, 2021. The increase resulted from additional interest income, primarily generated from growth of $316.6 million in average interest-earning assets for the year-to-date period ending June 30, 2022, compared to the period ending June 30, 2021, due to the addition of loans, securities, and cash equivalents in the Merger, and organic growth subsequent to the Merger. Net interest income in the first six months of 2022 also benefited from a reduction of 36 basis points in the overall rates paid on interest-bearing liabilities.

Interest income and fees on loans receivable increased by $4.1 million, or 41.6%, to $14.1 million for the first six months of 2022, from $9.9 million for the first six months of 2021 due to an increase of $168.9 million in the average balance of loans receivable, which increased interest income by $3.6 million, and an increase of 21 basis points in the average yield on loans, which increased interest income by $531 thousand. The increase in the average balance of loans receivable was primarily the result of the addition of loans in the Merger as well as organic loan growth. In addition, the increase in the average yield on loans receivable for the first six months of 2022 was primarily the result of higher yields earned on the commercial loan portfolio and, to a lesser extent, higher yields on multi-family loans.

Interest income on securities increased by $929 thousand, or 187.3%, for the first six months of 2022 to $1.4 million, compared to $496 thousand in the first six months of 2021. There was an increase of $95.7 million in the average balance of securities which increased interest income by $711 thousand, and an increase in the average interest rate earned on securities of 41 basis points, which increased interest income by $218 thousand. The increase in securities resulted from securities acquired in the Merger and management’s efforts to invest excess liquidity in longer-term securities to improve yields.

Other interest income increased by $651 thousand, or 294.6%, during the first six months of 2022, compared to the first six months of 2021, primarily due to an increase in the average rate earned on short term investments of 61 basis points, which increased interest income by $643 thousand, and an increase of $53.0 million in the average balance of interest-earning deposits and other short-term investments, which increased interest income by $45 thousand. This increase was partially offset by a decrease of $37 thousand in the dividend income on Federal Home Loan Bank (“FHLB”) and Federal Reserve Board (“FRB”) stock between the two periods.

Total interest expense for the first six months of 2022 decreased by $825 thousand, or 41.4%, to $1.2 million, compared to $2.0 million during the first six months of 2021, due to a decrease of 36 basis points in the Company’s cost of interest-bearing liabilities. The lower rates paid offset the impact of an increase of $227.6 million in average interest-bearing liabilities, due to an increase of $251.8 million of interest-bearing deposits, primarily due to the Merger, and an increase of $31.1 million in short term borrowings, partially offset by a decrease of $52.1 million of FHLB advances.

Interest expense on deposits decreased by $161 thousand, or 18.7%, for the six months ended June 30, 2022, compared to the same period in 2021. The decrease was primarily attributable to a decrease of 17 basis points in the average rate paid on deposits due to increases in non-interest bearing and lower rate deposits, which caused interest expense on deposits to decrease by $502 thousand. This decrease was partially offset by the effects of an increase of ~~$306.1~~$251.8 million in the average balance of deposits, primarily because of the ~~merger,~~Merger, which increased interest expense by ~~$307~~$341 thousand.

Interest expense on borrowings ~~increased~~decreased by ~~$16~~$664 thousand, for the three months ended June 30, 2021, compared to the three months ended June 30, 2020 primarily due to an increase in average short term borrowings (securities sold under agreements to repurchase) of $60.1 million and a long term borrowing of $14 million that were assumed in the Merger at an average rate of 0.09%.

~~Six Months Ended June 30, 2021 Compared to the Six Months Ended June 30, 2020~~

~~For the six months ended June 30, 2021, net interest income before provisions increased by $2.7 million to $8.7 million compared to $5.9 million~~or 58.5%, for the six months ended June 30, 2020. The increase in net interest income during the six months ended June 30, 2021 primarily resulted from an increase in interest income of $1.5 million due to higher interest income on loans receivable due to loans added in the CFBanc Merger. The increase in net interest income was also the result of a decrease in total interest expense of $1.2 million due to a reduction in rates paid on interest bearing liabilities from 1.46% for the six months ended June 30, 2020, to 0.64% for the six months ended June 30, 2021.

~~Interest income and fees on loans receivable increased by $1.2 million during the six months ended June 30, 2021~~2022, compared to the six months ended June 30, ~~2020~~2021. The decrease was attributable to a decrease of 76 basis points in the average borrowing rate, which decreased interest expense by $505 thousand, and a decrease in average borrowings of $24.2 million during the period, which decreased interest expense by $159 thousand. The decrease in the average balance of borrowings was due to ~~an increase~~a decrease of ~~$50.9~~$52.1 million in average borrowings from the FHLB and a decrease of $3.2 million in the average balance of ~~loans receivable, primarily resulting from~~ the ~~Merger,~~Company’s junior subordinated debentures, which ~~increased interest income~~were paid off in the third quarter of 2021, partially offset by ~~over $1.0 million, and~~ an increase of ~~5 basis points in the average loan yield, due to a higher average yield on the loan portfolio acquired from City First Bank in the Merger, which increased interest income by $116 thousand.~~

Interest income on securities increased by $361 thousand for the six months ended June 30, 2021, compared to the six months ended June 30, 2020. The increase in interest income on securities primarily resulted from an increase of $73.8$31.1 million in the average balance of short-term borrowings (primarily securities ~~because of the merger, which increased interest income by $469 thousand, partially offset by a decrease of 135 basis points~~sold under agreements to repurchase assumed in the ~~average interest yield earned on investment securities, which decreased interest income by $108 thousand.~~Merger).

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~~Other~~The net interest ~~income~~margin increased ~~$5 thousand during~~to 2.89% for the ~~six months~~six-month period ended June 30, ~~2021 compared to~~2022 from 2.35% for the ~~six months ended June 30, 2020. The Company recorded higher interest income on regulatory stock during the six months~~six-month period ended June 30, 2021, primarily due to ~~interest earned on FRB and FHLB stock acquired from~~an increase in the ~~CFBanc Merger during the period, which combined with interest on Broadway Federal Bank’s holdings~~volume of ~~FHLB stock, increased interest income by $32 thousand. This increase was partially offset by a decrease of $27 thousand in interest income generated on~~ interest-earning ~~cash in other banks for the six months ended June 30, 2021 compared to the six months ended June 30, 2020. The decrease was primarily~~assets (mainly due to ~~a decrease of 65 basis points in the average rate earned on interest-earning cash, which more than offset the positive effects of~~ an increase ~~of $128.4 million~~ in the average balance of ~~interest-earning cash because~~loans receivable), the contribution of higher loan yields earned on the ~~merger.~~

~~During the six months ended June 30, 2021, interest expense on deposits decreased by $1.2 million due to~~commercial loan portfolio, and a decrease ~~of 90 basis points~~ in the average cost of deposits, which decreased interest expense by $1.3 million, partially offset by the effects of an increase of $155.2 million in the average balance of deposits, largely because of the deposits assumed in the merger, which increased interest expense by $145 thousand.

During the six months ended June 30, 2021, interest expense on borrowings decreased by $53 thousand, compared to the first half of 2020. The lower interest expense on borrowings during the first half of 2021 reflected a reduction in the average balance of FHLB advances of $2.8 million, which reduced interest expense by $27 thousand, as well as a reduction in the interest rate paid on ~~subordinated debt~~interest-bearing liabilities of ~~116~~36 basis points, which reduced interest expense by $21 thousand. These decreases were offset by an increase in interest expense on other borrowings assumed in the merger with CFBanc of $16 thousand, although the rate paid on these borrowings was only 0.09%.points.

~~The net interest margin decreased by 10 basis points to 2.35% for the six months ended June 30, 2021 from 2.45% for the same period in 2020.~~

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The following tables set forth the average balances, average yields and costs, and certain other information for the periods indicated. All average balances are daily average balances. The yields set forth below include the effect of deferred loan fees, and discounts and premiums that are amortized or accreted to interest income or expense. We do not accrue interest on loans on non-accrual status, but the balance of these loans is included in the total average balance of loans receivable, which has the effect of reducing average loan yields.

		For the three months ended															For the three months ended
		June 30, 2021							June 30, 2020								June 30, 2022							June 30, 2021
(Dollars in Thousands)		Average Balance		Interest		Average Yield/ Cost			Average Balance		Interest		Average Yield/ Cost				Average Balance		Interest		Average Yield/ Cost			Average Balance		Interest		Average Yield/ Cost
Assets
Interest-earning assets:
Interest-earning deposits		$	227,043	$	71		0.13	%	$	40,416	$	46		0.46	%		$	210,978	$	788		1.49	%	$	227,043	$	71		0.13	%
Securities			158,608		440		1.11	%		10,431		65		2.49	%			199,472		796		1.60	%		158,608		440		1.11	%
Loans receivable (1)			611,092		6,300		4.12	%		444,530		4,429		3.99	%			657,026		6,879		4.19	%		611,092		6,300		4.12	%
FRB and FHLB stock			4,087		73		7.14	%		3,518		28		3.18	%			2,668		38		5.70	%		4,087		73		7.14	%
Total interest-earning assets			1,000,830	$	6,884		2.75	%		498,895	$	4,568		3.66	%			1,070,144	$	8,501		3.18	%		1,000,830	$	6,884		2.75	%
Non-interest-earning assets			33,296							10,466								107,532							33,296
Total assets		$	1,034,126						$	509,361							$	1,177,675						$	1,034,126

Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Money market deposits		$	178,819	$	223		0.50	%	$	46,364	$	112		0.97	%		$	197,751	$	194		0.39	%	$	178,819	$	223		0.50	%
Passbook deposits			69,401		57		0.33	%		53,167		81		0.61	%			62,458		13		0.08	%		69,401		57		0.33	%
NOW and other demand deposits			190,734		40		0.08	%		54,362		3		0.02	%			292,248		42		0.06	%		190,734		40		0.08	%
Certificate accounts			198,403		157		0.32	%		177,392		771		1.74	%			199,043		100		0.20	%		198,403		157		0.32	%
Total deposits			637,357		477		0.30	%		331,285		967		1.17	%			751,500		349		0.19	%		637,357		477		0.30	%
FHLB advances			111,120		549		1.98	%		119,315		536		1.80	%			39,628		85		0.86	%		111,120		549		1.98	%
Junior subordinated debentures			3,144		21		2.67	%		4,038		34		3.37	%			-		-		-			3,144		21		2.67	%
Other borrowings			74,136		16		0.09	%		-		-		-				68,352		29		0.17	%		74,136		16		0.09	%
Total interest-bearing liabilities			825,757	$	1,063		0.51	%		454,638	$	1,537		1.35	%			859,980	$	463		0.22	%		825,757	$	1,063		0.51	%
Non-interest-bearing liabilities			66,279							5,523								107,771							66,279
Stockholders’ Equity			142,090							49,200								210,424							142,090
Total liabilities and stockholders’ equity		$	1,034,126						$	509,361							$	1,177,675						$	1,034,126

Net interest rate spread (2)				$	5,821		2.24	%			$	3,031		2.31	%				$	8,038		2.96	%			$	5,821		2.24	%
Net interest rate margin (3)							2.33	%						2.43	%							3.00	%						2.33	%
Ratio of interest-earning assets to interest-bearing liabilities	Ratio of interest-earning assets to interest-bearing liabilities						121.20	%						109.73	%	Ratio of interest-earning assets to interest-bearing liabilities						124.51	%						121.20	%

(1)	Amount is net of deferred loan fees, loan discounts and loans in process, and includes deferred origination costs and loan premiums.

(2)	Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.

(3)	Net interest rate margin represents net interest income as a percentage of average interest-earning assets.

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		For the six months ended															For the six months ended
		June 30, 2021							June 30, 2020								June 30, 2022							June 30, 2021
(Dollars in Thousands)		Average Balance		Interest		Average Yield/ Cost			Average Balance		Interest		Average Yield/ Cost				Average Balance		Interest		Average Yield/ Cost			Average Balance		Interest		Average Yield/ Cost
Assets
Interest-earning assets:
Interest-earning deposits		$	162,630	$	106		0.13	%	$	34,250	$	133		0.78	%		$	215,622	$	872		0.81	%	$	162,630	$	106		0.13	%
Securities			84,509		496		1.17	%		10,689		135		2.53	%			180,220		1,347		1.49	%		84,509		496		1.17	%
Loans receivable (1)			486,317		9,944		4.09	%		435,388		8,788		4.04	%			655,260		14,083		4.30	%		486,317		9,944		4.09	%
FHLB stock			3,759		115		6.12	%		3,320		83		5.00	%
FRB and FHLB stock																		2,668		78		5.85	%		3,759		115		6.12	%
Total interest-earning assets			737,215	$	10,661		2.89	%		483,647	$	9,139		3.78	%			1,053,769	$	16,380		3.11	%		737,215	$	10,661		2.89	%
Non-interest-earning assets			22,425							10,464								95,849							22,425
Total assets		$	759,640						$	494,111							$	1,149,618						$	759,640

Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Money market deposits		$	127,807	$	304		0.48	%	$	42,130	$	217		1.03	%		$	202,414	$	383		0.38	%	$	127,807	$	304		0.48	%
Passbook deposits			66,800		114		0.34	%		50,936		169		0.66	%			64,641		21		0.06	%		66,800		114		0.34	%
NOW and other demand deposits			122,712		47		0.08	%		48,545		6		0.02	%			261,354		81		0.06	%		122,712		47		0.08	%
Certificate accounts			159,572		395		0.50	%		180,106		1,630		1.81	%			200,244		214		0.21	%		159,572		395		0.50	%
Total deposits			476,891		860		0.36	%		321,717		2,022		1.26	%			728,653		699		0.19	%		476,891		860		0.36	%
FHLB advances			110,803		1,076		1.94	%		113,595		1,108		1.95	%			58,738		427		1.45	%		110,803		1,076		1.94	%
Junior subordinated debentures			3,209		43		2.68	%		4,164		80		3.84	%			-		-		-			3,209		43		2.68	%
Other borrowings			37,068		16		0.09	%		-		-		-				68,185		44		0.13	%		37,068		16		0.09	%
Total interest-bearing liabilities			627,971	$	1,995		0.64	%		439,476	$	3,210		1.46	%			855,576	$	1,170		0.27	%		627,971	$	1,995		0.64	%
Non-interest-bearing liabilities			36,030							5,574								106,760							36,030
Stockholders’ Equity			95,639							49,061								187,282							95,639
Total liabilities and stockholders’ equity		$	759,640						$	494,111							$	1,149,618						$	759,640

Net interest rate spread (2)				$	8,666		2.26	%			$	5,929		2.32	%				$	15,210		2.84	%			$	8,666		2.26	%
Net interest rate margin (3)							2.35	%						2.45	%							2.89	%						2.35	%
Ratio of interest-earning assets to interest-bearing liabilities	Ratio of interest-earning assets to interest-bearing liabilities						117.40	%						110.05	%	Ratio of interest-earning assets to interest-bearing liabilities						123.16	%						117.40	%

(1)	Amount is net of deferred loan fees, loan discounts and loans in process, and includes deferred origination costs and loan premiums.

~~(2) Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.~~

(2)	Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.

(3)	Net interest rate margin represents net interest income as a percentage of average interest-earning assets.

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Loan loss provision

The Company recorded a loan loss provision recapture of $577thousand for the three months ended June 30, 2022 and a loan loss provision of $81 thousand for the ~~three months~~three-month period ended June 30, 2021. ~~No loan loss provision was recorded during the first quarter of 2021, so the loan loss provision for~~For the six months ended June 30, 2022 and 2021, ~~was also $81 thousand. The provision recorded for~~ the ~~three months ended June 30, 2021, was the result of growth in the loan portfolio. There were no loan charge-offs recorded during the six months ended June 30, 2021.~~

~~The Bank did not record a loan loss provision or recapture during the three months ended June 30, 2020 and~~Company recorded a loan loss provision recapture of ~~$29~~$429 thousand ~~during the six months ended June 30, 2020. During the three months ended June 30, 2020 the Bank recorded additional provisions to increase the Allowance for Loan~~ and ~~Lease Losses (“ALLL”) for economic uncertainties related to the COVID-19 Pandemic. During the three months ended June 30, 2020, the Bank maintained its ALLL at $3.2 million, after adjusting for~~ a loan loss ~~recovery~~provision of $4$81 thousand, ~~despite a net decrease~~respectively. The $75 million of ~~$6.9 million in~~capital contributed by the ~~loans held for investment portfolio during~~Company to the ~~three months ended June 30, 2020.~~Bank reduced multi-family and commercial real estate loan concentration levels. This reduced the risk associated with the qualitative factors used to estimate the required ALLL. No loan charge-offs were recorded during the ~~three months~~three- or ~~the six months~~six-month periods ended June 30, ~~2020.~~2022 or 2021. The ALLL decreased to $3.0 million as of June 30, 2022, compared to $3.4 million as of December 31, 2021.

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Non-interest Income

Non-interest income for the three months ended June 30, ~~2021~~2022 totaled ~~$2.2 million~~$261 thousand compared to ~~$242 thousand~~$2.2 million for the three months ended June 30, ~~2020. Non-interest income increased by $2.0 million primarily due to a grant of $1.8 million from the CDFI Fund during the second quarter.~~2021. The Bank fulfilled the requirements to receive the award during the second quarter. Other income during the three months ended June 30, 2021 included $154 thousand in management fees related to New Market Tax Credit projects managed by City First Bank in Washington, D.C. No gain on sale of loans was recorded during the three months and six months ended June 30, 2021 compared to gains of $116 thousand recorded during the three months ended June 30, 2020.

~~For the six months ended June 30, 2021, non-interest income totaled $2.3 million compared to $439 thousand for the same period in the prior year. The increase~~decrease of $1.9 million in non-interest income was primarily due to ~~the grant~~a nonrecurring benefit of $1.8 million ~~received~~from a grant from the United States Department of the Treasury’s CDFI Fund during the three months ended June 30, 2021.

For the six months ended June 30, 2022, non-interest income totaled $542 thousand compared to $2.3 million for the same period in the prior year. The decrease of $1.8 million in non-interest income was primarily due to the non-recurring grant received during the three months ended June 30, 2021.

Non-interest Expense

~~Non-interest~~Total non-interest expense ~~for the three months ended June 30, 2021 totaled $5.4 million, compared to $3.4~~was $6.3 million for the ~~three months ended June 30, 2020.~~second quarter of 2022, compared to $5.4 million for the second quarter of 2021. The increase ~~of $2.0 million~~ in non-interest ~~expense~~expenses was mainly due to increases of $488 thousand in compensation and benefits expenses and $445 thousand in professional services expenses. The $488 thousand increase in compensation and benefits expenses during the three months ended June 30, ~~2021 compared to the same quarter of 2020~~2022 was ~~primarily~~ due to ~~the inclusion~~increases in temporary help expense, employee benefit costs, and director expenses. The increase of ~~the non-interest expenses for the merged Bank, which included increases of $836~~$445 thousand in ~~compensation and benefits expense, $345 thousand in information~~professional services ~~expense, $307 thousand in occupancy expense, $93 thousand in loan related~~ expenses ~~and $82 thousand in supervisory costs. In addition, non-interest expense for~~during the three months ended June 30, ~~2021 included $207~~2022 was primarily the result of $210 thousand in ~~Merger-related~~regulatory consulting fees, $146 thousand in auditor fees, $75 thousand in legal fees and $67 thousand in board search fees.

For the first six months of 2022, non-interest expense totaled $12.2 million, compared to $14.0 million for the same period in the prior year. The decrease of $1.8 million between the periods primarily resulted from decreases in compensation and benefits expenses of $1.3 million and professional services expenses of $1.1 million, and to a lesser extent, decreases in insurance and occupancy expenses. These decreases were partially offset by increases in information services expenses of $825 thousand and various other costs, ~~and $131 thousand in~~including amortization of the core deposit intangible that was recorded in connection with the Merger.

~~For~~ The net decrease compared to the prior year was largely associated with Merger-related expenses incurred during the first quarter of 2021. The Company’s results for the first six months ~~ended June 30,~~of 2021 ~~non-interest expense totaled $14.0 million, compared to $6.6 million for~~reflect the same period in the prior year. The increase of $7.4 million in non-interest expense was primarily due to merger-related expenses of $5.6 million in 2021, as well as the inclusion of the non-interest expenses of the acquiredconsolidated operations of CFB since the ~~Bank.~~Merger on April 1, 2021.

Income Taxes

Income tax expense or benefit is computed by applying the statutory federal income tax rate of 21%. State taxes are recorded at the State of California tax rate and apportioned based on an allocation schedule to reflect that a portion of the Company’s operations are conducted in the Washington, D.C. area. The Company recorded income tax expense of ~~$1.8 million during~~$757 thousand for the second quarter ~~representing an~~of 2022 and $1.8 million for the second quarter of 2021. The effective tax rate ~~of 71.3%, and a benefit of $348 thousand during~~for the ~~six months~~three-month periods ended June 30, ~~2021.~~2022 and 2021, was 29.38% and 71.31%, respectively. The high effective income tax for the second quarter of 2021 reflects changes in the assumptions used to estimate the Company’s annual income tax expense. Income tax expense for the three months ~~and six months~~ ended June 30, 2021 also ~~includes~~included an increase of $370 thousand in the valuation allowance on the Company’s deferred tax assets to record an allowance against net operating loss carryforwards for the State of California, net of federal tax benefit. This change in the valuation allowance was required because shares of common stock issued in the private placements that closed a few days after the merger triggered a limitation on the use of the deferred tax assets.

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~~The Company recorded income tax benefits of $345 thousand and $395 thousand for~~For the ~~three and~~ six months ended June 30, ~~2020, respectively. The~~2022, income tax expense was $1.1 million, compared to an income tax benefit ~~during~~of $348 thousand for the ~~three months and~~ six months ended June 30, 2020 was primarily due to a tax adjustment of $273 thousand upon the resolution of an outstanding audit issue with the California Franchise Tax Board for tax years 2009 to 2013. In addition, the Company recorded low-income housing tax credits of $29 thousand and $58 thousand during the three months and six months ended June 30, 2020, respectively.2021.

Financial Condition

Total Assets

Total assets increased by ~~$557.6~~$130.7 million to ~~$1.041~~$1.224 billion at June 30, ~~2021~~2022 from ~~$483.4 million~~$1.094 billion at December 31, ~~2020.~~2021. The increase in total assets was primarily due to ~~the addition~~growth in cash and cash equivalents of ~~assets~~$48.6 million and growth in ~~the CFBanc Merger, which increased total assets by $501.2~~$81.9 million ~~on the merger date.~~in investment securities.

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Securities Available-For-Sale

Securities available-for-sale totaled ~~$158.8~~$238.3 million at June 30, ~~2021,~~2022, compared with ~~$10.7~~$156.4 million at December 31, ~~2020.~~2021. The ~~$148.1~~$81.9 million of increase in securities available-for-sale during the six months ended June 30, ~~2021~~2022 was primarily due to the ~~addition~~deployment of $15.0 million of the $150.0 million ofECIP funds into securities ~~as a result~~in June. The remainder of the ~~CFBanc Merger, as well as additional purchases of securities of $4.1 million. These increases were~~increase was due to investing liquidity dollars into higher-yielding short-term securities. This increase was partially offset by an increase in accumulated other comprehensive loss of $9.4 million since the end of 2021 due to a decline in the fair value of investment securities available-for-sale, net ~~amortizations~~of taxes. These decreases in the fair values of available-for-sale investment securities during 2022 were the result of increases in market interest rates, which caused the fair value of the Company’s fixed rate investments to decrease. The declines in fair value were not the result of a change in the creditworthiness of any of the issuers of those securities.

Loans Receivable

Loans receivable decreased by $1.6 million during first six months of 2022 primarily due to loan payoffs in excess of originations. During the first six months of 2022, the Bank originated $33.0 million multi-family loans and ~~paydowns~~$16.2 million of ~~mortgage-backed securities~~commercial real estate loans and commercial loans. Loan advances on pre-existing construction loans totaled $2.8 million during the same period. Loan payoffs and repayments totaled $49.8 million during the first six months of ~~$6.5 million.~~2022.

Allowance for Loan Losses

As a smaller reporting company as defined by the SEC, the Company is not required to adopt the current expected credit losses (“CECL”) accounting standard until 2023; consequently, the Bank’s ALLL is based on probable incurred losses at the date of the consolidated balance sheet, rather than projections of future economic conditions over the life of the loans. In determining the adequacy of the ALLL, ~~within the context of the current uncertainties posed by the COVID-19 Pandemic,~~ management has considered the historical and current performance of the Company’s portfolio, as well as various measures of the quality and safety of the portfolio, such as debt servicing and loan-to-value ratios. Management is continuing to monitor the loan portfolio and regularly communicating with borrowers to determine the continuing adequacy of the ALLL.

We record a provision for loan losses as a charge to earnings when necessary in order to maintain the ALLL at a level sufficient, in management’s judgment, to absorb probable incurred losses in the loan portfolio. At least quarterly we conduct an assessment of the overall quality of the loan portfolio and general economic trends in the local market. The determination of the appropriate level for the allowance is based on that review, considering such factors as historical loss experience for each type of loan, the size and composition of our loan portfolio, the levels and composition of our loan delinquencies, non-performing loans and net loan charge-offs, the value of underlying collateral on problem loans, regulatory policies, general economic conditions, and other factors related to the collectability of loans in the portfolio.

The ALLL was ~~$3.3~~$3.0 million or ~~0.53%~~0.46% of gross loans held for investment at June 30, ~~2021,~~2022, compared to ~~$3.2~~$3.4 million, or ~~0.88%~~0.52% of gross loans held for investment, at December 31, ~~2020.~~ 2021. The ~~decrease in~~Company contributed $75 million of the ~~ALLL as a percentage~~proceeds from the sale of ~~gross loans is because there is no ALLL~~the Series C Preferred Stock to the Bank which reduced the Bank’s multi-family and commercial real estate loan concentration levels. This also reduced the risk associated with the ~~loans acquired in~~qualitative factors used to estimate the ~~merger. The increase in balance~~required ALLL as of ~~the ALLL during the six months ended~~ June 30, ~~2021 was~~ 2022. As a result, the ~~result of additional~~Bank recorded a loan loss ~~provisions due to loan growth during~~provision recapture of $577 thousand for the ~~period.~~second quarter of 2022.

As of June 30, ~~2021,~~2022, there were no loan delinquencies ~~totaled $1.9 million,~~greater than 30 days compared to $0$2.4 million at December 31, ~~2020. None of these loans were greater than 90 days delinquent. The increase in delinquencies was due to commercial real loans and commercial loans acquired in the merger.~~2021.

Non-performing loans (“NPLs”) consist of delinquent loans that are 90 days or more past due and other loans, including troubled debt restructurings that do not qualify for accrual status. At June 30, ~~2021,~~2022, NPLs totaled ~~$735~~$627 thousand, compared to ~~$787~~$684 thousand at December 31, ~~2020.~~2021. The decrease of ~~$50~~$57 thousand in NPLs was due to repayments.

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In connection with our review of the adequacy of our ALLL, we track the amount and percentage of our NPLs that are paying currently, but nonetheless must be classified as NPL for reasons unrelated to payments, such as lack of current financial information and an insufficient period of satisfactory performance. As of June 30, 2022 and December 31, 2021, all our non-performing loans were current in their payments. Also, in determining the ALLL, we considered the ratio of the ALLL to NPLs, which was ~~448.4%~~472.57% at June 30, ~~2021~~2022 compared to ~~408.5%~~495.8% at December 31, ~~2020.~~2021.

When reviewing the adequacy of the ALLL, we also consider the impact of charge-offs, including the changes and trends in loan charge-offs. There have been no loan charge-offs since 2015. In determining charge-offs, we update our estimates of collateral values on NPLs by obtaining new appraisals at least every twelve months. If the estimated fair value of the loan collateral less estimated selling costs is less than the recorded investment in the loan, a charge-off for the difference is recorded to reduce the loan to its estimated fair value, less estimated selling costs. Therefore, certain losses inherent in our total NPLs are recognized periodically through charge-offs. The impact of updating these estimates of collateral value and recognizing any required charge-offs is to increase charge-offs and reduce the ALLL required on these loans.

There were no recoveries or charge-offs recorded during either the ~~first half of 2021 and $4 thousand in recoveries were recorded during the first half of 2020.~~three- or six-month periods ending June 30, 2022 or 2021.

Impaired loans at June 30, ~~2021~~2022 were ~~$4.1~~$2.2 million, compared to ~~$4.7~~$2.3 million at December 31, ~~2020.~~2021. The decrease of ~~$657~~ $209 thousand in impaired loans was primarily due to ~~the payoff of a $30 thousand commercial loan and loan repayments.~~paydowns. Specific reserves for impaired loans were ~~$45~~$7 thousand, or ~~1.10%~~0.28% of the aggregate impaired loan amount at June 30, ~~2021,~~2022, compared to ~~$141~~$7 thousand, or ~~2.98%~~0.30% of the aggregate impaired loan amount at December 31, ~~2020.~~

On March 27, 2020, the Coronavirus Aid Relief and Economic Security Act (“CARES Act”) was signed into law by Congress. The CARES Act provides financial institutions, under specific circumstances, the opportunity to temporarily suspend certain requirements under generally accepted accounting principles related to Troubled Debt Restructurings (“TDR’s”) for a limited period of time to account for the effects of COVID-19. In March 2020, a joint statement was issued by federal and state regulatory agencies, after consultation with the FASB, to clarify that short-term loan modifications, such as payment deferrals, fee waivers, extensions of repayment terms or other insignificant payment delays, are not TDRs if made on a good-faith basis in response to COVID-19 to borrowers who were current prior to any relief. Under this guidance, six months or less is provided as an example of short-term, and current is defined as less than 30 days past due at the time the modification program is implemented. The guidance also provides that these modified loans generally will not be classified as non-accrual loans during the term of the modification.

The Bank has implemented a loan modification program for the effects of COVID-19 on its borrowers. At the date of this filing, two borrowers have requested loan modifications. Both borrowers were current at the time modification program was implemented. To date, no modifications have been granted.2021.

We believe that the ALLL is adequate to cover probable incurred losses in the loan portfolio as of June 30, ~~2021,~~2022, but because of the ~~current~~ongoing uncertainties posed by the COVID-19 Pandemic, there can be no assurance that actual losses will not exceed the estimated amounts. In addition, the OCC and the Federal Deposit Insurance Corporation (“FDIC”) periodically review the ALLL as an integral part of their examination process. These agencies may require an increase in the ALLL based on their judgments of the information available to them at the time of their examinations.

~~Office Properties and Equipment~~

Net office properties and equipment increased by $6.6 million to $9.2 million at June 30, 2021 from $2.5 million as of December 31, 2020. The large increase was due to the result of the merger, as CFBanc owned the land and building that in which it operates its headquarters and branch. Office properties and equipment, net increased by $7.0 million as of the date of the merger.

Goodwill and Intangible Assets

~~Table of Contents~~

As a result of the ~~merger,~~Merger, the Company recorded $26.0 million of goodwill and $3.3 million of core deposit intangible assets. Goodwill and intangible assets acquired in a purchase business combination and that are determined to have an indefinite useful life are not amortized, but tested for impairment at least annually or more frequently if events and circumstances exist that indicate the necessity for such impairment tests to be performed.

The core deposit intangible asset is amortized on an accelerated basis reflecting the pattern in which the economic benefits of the intangible asset are consumed or otherwise used up. The estimated life of the core deposit intangible is approximately 10 years. During the three and six months ended June 30, 2022, the Company recorded $108 thousand and $217 thousand, respectively, of amortization expense related to the core deposit intangible. During the three- and six-month periods ending June 30, 2021, the Company recorded $131 thousand of amortization expense related to the core deposit intangible.

No impairment charges were recorded during 2022 or 2021 for goodwill or the core deposit intangible.

Total Liabilities

Total liabilities ~~increased~~decreased by ~~$463.0~~$12.9 million to ~~$897.5~~$939.5 million at June 30, ~~2021~~2022 from ~~$434.5~~$952.4 million at December 31, ~~2020. The~~2021, largely due to a decrease in FHLB borrowings which was partially offset by an increase in ~~total liabilities was largely the result~~deposits.

Table of the liabilities assumed in the CFB merger, and was primarily comprised of an increase of $ 389.4 million in deposits and $84.7 million of other borrowings, offset by reductions of $14.5 million in FHLB advances during the period.Contents

Deposits

Deposits increased to ~~$705.0 million~~$816.2 million at June 30, ~~2021~~2022 from ~~$315.6~~$788.1 million at December 31, ~~2020, due~~2021, which consisted of increases of $76.1 million in ICS deposits (ICS deposits are the Bank’s own money market accounts in excess of FDIC insured limits whereby the Bank makes reciprocal arrangements for insurance with other banks), $12.7 million in CDARS deposits (CDARS deposits are similar to ICS deposits, but involve certificates of ~~$353.7~~deposit instead of money market accounts), decreases of $28.7 million ~~that were assumed~~ in ~~the Merger and additional growth in~~liquid deposits ~~of $39.0 million since the Merger, primarily in~~(NOW, demand, money market, and ~~demand~~passbook accounts) and decreases of $6.6 million in other certificates of deposit ~~accounts.~~

~~Single~~accounts. Five customer relationships accounted for approximately ~~9% and 13%~~38% of our deposits at June 30, ~~2021 and December 31, 2020, respectively.~~2022. We expect to maintain ~~this relationship with~~ these ~~customers~~relationships for the foreseeable future.

Borrowings

Total borrowings ~~increased by $69.7~~at June 30, 2022 consisted of advances to the Bank from the FHLB of $32.9 million, repurchase agreements of $67.3 million, and borrowings associated with our Qualified Active Low-Income Business lending activities of $14.0 million compared to ~~$183.5~~ advances to the Bank from the FHLB of $86.0 million, repurchase agreements of $52.0 million, and borrowings associated with our Qualified Active Low-Income Business lending activities of $14.0 million as of December 31, 2021.

Balances of outstanding FHLB advances decreased to $32.9 million at June 30, ~~2021 from $113.8~~2022, compared to $86.0 million at December 31, ~~2020.~~ 2021 due to the early payoff of $40.0 million in higher rate advances during the year. The ~~increase consisted of the addition of $73.9 million of other borrowings~~weighted average rate on FHLB advances decreased to 1.22% at ~~the merger date, which further increased to $84.7 million as of~~ June 30, ~~2021. This increase was offset by reductions in FHLB advances~~2022, compared to 1.85% at December 31, 2021 due to the payoff of ~~$14.5 million and in our junior subordinated floating~~higher rate ~~debentures of $510 thousand.~~advances.

The Bank enters into agreements under which it sells securities subject to an obligation to repurchase the same or similar securities. Under these arrangements, the Bank may transfer legal control over the assets but still retain effective control through an agreement that both entitles and obligates the Bank to repurchase the assets. As a result, these repurchase agreements are accounted for as collateralized financing agreements (i.e., secured borrowings) and not as a sale and subsequent repurchase of securities. The obligation to repurchase the securities is reflected as a liability in the Banks’s consolidated balance sheets, while the securities underlying the repurchase agreements remain in the respective investment securities ~~asset~~available-for-sale accounts. In other words, there is no offsetting or netting of the investment securities assets with the repurchase agreement liabilities. The outstanding balance of these borrowings totaled $67.3 million and $52.0 million as of June 30, 2022 and December 31, 2021, respectively, and the interest rate was 0.22% and 0.10%, respectively. These agreements mature on a daily basis. As of June 30, 2022, securities ~~that have been~~with a market value of $72.7 million were pledged as collateral ~~include $17.6~~for securities sold under agreements to repurchase and included $35.1 million of U.S. Government Agency securities ~~$47.2~~, $27.6 million of mortgage-backed securities, $3.8million of federal agency CMO and $6.2 million of SBA Pool securities. The market value of securities pledged totaled $53.2 million as of December 31, 2021 and included $13.3 million of U.S. Government Agency securities and $39.9 million of mortgage-backed securities.

One relationship accounted for 80% of our balance of securities ~~and $6.5 million of collateralized mortgage obligations~~sold under agreements to repurchase as of June 30, ~~2021. The weighted average rate paid on repurchase agreements was 0.10%~~2022. We expect to maintain this relationship for the ~~three months ended June 30, 2021.~~foreseeable future.

In connection with the New Market Tax Credit activities of the Bank, CFC 45 is a partnership whose members include CFNMA and City First New Markets Fund II, LLC. This CDE acts in effect as a pass-through for a Merrill Lynch allocation totaling $14.0 million that needed to be deployed. In December 2015, Merrill Lynch made a $14.0 million non-recourse loan to CFC 45, whereby CFC 45 passed that loan through to a QALICB. The ~~weighted~~ ~~average interest rate on~~loan to the FHLB Advances was 1.95% at June 30, 2021, compared with 1.94% at December 31, 2020. The weighted average interest rate on the subordinated floating rate debentures decreased to 2.69% at June 30, 2021 from 2.77% at December 31, 2020, primarilyQALICB is secured by a Leasehold Deed of Trust that, due to ~~decreases~~the pass-through, non-recourse structure, is operationally and ultimately for the benefit of Merrill Lynch rather than CFC 45. Debt service payments received by CFC 45 from the QALICB are passed through to Merrill Lynch in ~~LIBOR.~~return for which CFC 45 receives a servicing fee. The financial statements of CFC 45 are consolidated with those of the Bank and the Company.

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Stockholders’ Equity

Stockholders’ equity was ~~$143.5~~$284.6 million, or ~~13.8%~~23.3%, of the Company’s total assets, at June 30, ~~2021,~~2022, compared to ~~$48.9~~$141.0 million, or ~~10.1%~~12.9% of the Company’s total assets at December 31, ~~2020.~~ 2021. The increase in total stockholders’ equity is primarily due to the closing of the private placement of the Series C Preferred Stock, which increased stockholders’ equity by $150.0 million during the second quarter of 2022. This increase was partially offset by a decrease in accumulated other comprehensive income of $9.4 million since the end of 2021 due to a decline in the fair value of investment securities available-for-sale, net of taxes. These decreases in the fair values of available-for-sale investment securities during 2022 were the result of increases in market interest rates, which caused the fair value of the Company’s fixed rate investments to decrease; the declines in fair value were not the result of a change in the creditworthiness of any of the issuers of those securities.

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Subsequent to the closing of the private placement of the Series C Preferred Stock, the Company ~~issued $63.3~~contributed $75.0 million ~~in common stock~~of the proceeds to the Bank. As a result, the Bank’s Community Bank Leverage Ratio (“CBLR”) increased to 15.87% at a June 30, 2022, compared to 9.45% at March 31, 2022, and 9.32% at December 31, 2021.

During the first quarter of 2022 the Company completed the exchange of all the Series A Fixed Rate Cumulative Redeemable Preferred Stock, with an aggregate liquidation value of $3 million, plus accrued dividends, for 1,193,317 shares of Class A Common Stock at an exchange price of $2.51 per share of ~~$2.49 and $3.0 million in preferred stock in connection with the merger.~~Class A Common Stock. In addition, during the quarter the Company ~~raised $30.9 million in net proceeds~~issued 542,449 shares of Class A Common Stock to directors, executive officers, and certain employees, including 495,262 shares of restricted stock to executive officers and certain employees, which vest over periods ranging from ~~the sale~~36 months to 60 months, and 47,187 shares of ~~common~~unrestricted stock ~~in private placements immediately following the merger on April 6, 2021.~~to directors which vested immediately.

The Company’s book value ~~was $1.96~~ per share ~~at June 30, 2021, and its tangible book value~~ was ~~$1.55~~$1.83 per share as of June 30, ~~2021 after adjusting for~~2022 compared to $1.92 per share as of December 31, 2021. The decrease in book value per share during the second quarter of 2022 is due to the decrease in equity related to the $9.4 million unrealized losses in the investment portfolio.

Tangible book value per common share is a non-GAAP measurement that excludes goodwill ~~of $26.0 million~~ and the net unamortized core deposit intangible ~~of $3.2 million,~~asset, which were both originally recorded in connection with the ~~merger.~~Merger. The Company uses this non-GAAP financial measure to provide supplemental information regarding the Company’s financial condition and operational performance. A reconciliation between book value and tangible book value per common share ~~was $1.74 per share~~is shown as ~~of December 31, 2021.~~follows:

	Common Equity Capital		Shares Outstanding		Per Share Amount
	(Dollars in thousands)

June 30, 2022:
Common book value	$	134,634		73,484,082	$	1.83
Less:
Goodwill		25,858
Net unamortized core deposit intangible		2,719
Tangible book value	$	106,057		73,484,082	$	1.44

December 31, 2021:
Common book value	$	138,000		71,768,419	$	1.92
Less:
Goodwill		25,996
Net unamortized core deposit intangible		2,936
Tangible book value	$	109,068	$	71,768,419	$	1.52

A capital contribution of $20 million was made to the Bank from the Company during the three months ended June 30, 2021. The Bank (City First Bank, N.A.) elected to adopt the Community Bank Leverage Ratio (“CBLR”) as of April 1, 2020 as reflected in its June 30, 2020 Call Report. The Bank’s CBLR was 10.10% at June 30, 2021.

Prior to Merger, the Company’s former subsidiary, Broadway Federal Bank, f.s.b., did not elect to adopt the CBLR and reported a Total Capital ratio of 20.20% and a Leverage ratio of 9.54% at December 31, 2020.

Liquidity

The objective of liquidity management is to ensure that we have the continuing ability to fund operations and meet our obligations on a timely and cost-effective basis. The Bank’s sources of funds include deposits, advances from the FHLB, other borrowings, proceeds from the sale of loans and investment securities, and payments of principal and interest on loans and investment securities. The Bank is currently approved by the FHLB of Atlanta to borrow up to 25% of total assets to the extent the Bank provides qualifying collateral and holds sufficient FHLB stock. This approved limit and collateral requirement would have permitted the Bank to borrow an additional ~~$24.6~~$279.3 million at June 30, ~~2021.~~2022 with sufficient pledged collateral. In addition, the Bank ~~has~~had additional lines of credit of ~~$11~~$11.0 million with other financial ~~institutions.~~institutions as of that date.

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The Bank’s primary uses of funds include withdrawals of and interest payments on deposits, originations of loans, purchases of investment securities, and the payment of operating expenses. Also, when the Bank has more funds than required for reserve requirements or short-term liquidity needs, the Bank invests in federal funds with the Federal Reserve Bank or in money market accounts with other financial institutions. The Bank’s liquid assets at June 30, ~~2021~~2022 consisted of ~~$210.4~~$280.1 million in cash and cash equivalents and ~~$68.4~~ $165.6 million in securities available-for-sale that were not pledged, compared to ~~$96.1~~$231.5 million in cash and cash equivalents and ~~$10.7~~$52.4 million in securities available-for-sale that were not pledged at December 31, ~~2020. The increases were due to assets acquired in the CFBanc Merger.~~2021. Currently, we believe that the Bank has sufficient liquidity to support growth over the foreseeable future. The increase in liquid assets during the second quarter of 2022 primarily resulted from the proceeds from the preferred stock issued during June of 2022.

The Company’s liquidity, separate from the Bank, is based primarily on the proceeds from financing transactions, such as the private ~~placements~~placement completed in ~~August 2013, October 2014, December 2016,~~June of 2022 and previous private placements including in April ~~2021 and dividends received from the Bank in 2021 and 2020.~~of 2021. The Bank is currently under no prohibition to pay dividends to the Company, but is subject to restrictions as to the amount of the dividends based on normal regulatory guidelines.

~~The~~

On a consolidated basis, the Company recorded net cash outflows from operating activities of $359 thousand during the six months ended June 30, 2022, compared to consolidated net cash outflows from operating activities of $2.6 million during the six months ended June 30, ~~2021, compared to consolidated net~~2021. Net cash outflows from operating activities ~~of $49.2 million~~ during the six months ended June 30, ~~2020.~~2022 were primarily attributable to decreases in other assets and other liabilities. Net cash outflows from operating activities during the six months ended June 30, 2021 were primarily attributable to the Company’s net ~~loss, whereas~~loss.

The Company recorded consolidated net cash outflows from ~~operating~~investing activities ~~for~~of $91.5 million during the six months ended June 30, ~~2020 were primarily due~~2022, compared to ~~originations of loans receivable held for sale of $110.9 million, offset primarily by proceeds from sales of loans receivable held for sale of $61.0 million.~~

~~The Company recorded~~ consolidated net cash inflows from investing activities of $58.4 million during the six months ended June 30, ~~2021, compared to consolidated net~~2021. Net cash ~~inflows of $23.4 million during~~outflows from investing activities for the six months ended June 30, ~~2020.~~ 2022 were primarily due to the purchase of $104.7 million of available-for-sale securities, offset by net loan repayments of $3.4 million. Net cash inflows from investing activities during the six months ended June 30, 2021, were primarily due to net cash acquired in the merger with City First Bank N.A. of $84.7 million, offset by cash used to fund new loans receivable held for investment of $29.7 million. ~~In comparison,~~

The Company recorded consolidated net cash inflows from ~~investing~~financing activities of $140.4 million during the six months ended June 30, ~~2020 were primarily due~~2022, compared to ~~principal payments on loans receivable held for investment~~

~~Table of Contents~~

~~The Company recorded~~ consolidated net cash inflows ~~from financing activities~~ of $58.5 million during the six months ended June 30, ~~2021, compared to consolidated net~~2021. Net cash inflows from ~~financing~~investing activities ~~of $50.0 million~~ during the six months ended June 30, ~~2020.~~2022 were primarily due to cash received from the closing of the $150 million private placement of Series C Preferred Stock along with increases in cash provided by increased deposits of $28.1 million and other borrowings of $15.3 million offset by cash used to repay FHLB advances of $53.0 million. Net cash inflows from ~~financing~~investing activities during the six months ended June 30, 2021 were primarily attributable to a net increase in deposits of $35.9 million and proceeds from the sale of stock of $30.8 million, ~~and $10.6 million in additional securities sold under agreements to repurchase,~~ offset by ~~a net decrease~~repayments of $17.5 million in FHLB advances. During the six months ended June 30, 2020, net cash inflows from financing activities were primarily due to a net increase in deposits of $18.1 million and net proceeds from FHLB advances of ~~$32.5~~$22.5 million.

Capital Resources and Regulatory Capital

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary, actions by the regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk-weightings, and other factors. As of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Bank exceeded all capital adequacy requirements to which it is subject and meets the qualifications to be considered “well capitalized.” ~~As of April 1, 2020, the Bank elected to follow the Community Bank Leverage Ratio guidelines.~~ (See Note 1211 – Regulatory Matters.)

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ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable

ITEM 4.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives of ensuring that information we are required to disclose in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures, and is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. There is no assurance that our disclosure controls and procedures will operate effectively under all circumstances. An evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures was performed under the supervision of the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) as of June 30, ~~2021.~~2022. Based on that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of June 30, ~~2021.~~2022.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three months ended June 30, ~~2021,~~2022, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial ~~reporting, except as noted below.~~reporting.

During the three months ended June 30, 2021, we completed the CFBanc Merger. (See Note 2 - Business Combination.) We are currently integrating CFBanc into our operations and internal control processes. As we complete this integration, we are analyzing, evaluating, and where necessary, making changes in control and procedures related to the CFBanc business, which we expect to complete within one year after the date of acquisition. Pursuant to the SEC’s guidance that an assessment of a recently acquired business may be omitted from the scope of an assessment in the year of acquisition, the scope of our assessment of the effectiveness of our internal controls over financial reporting at December 31, 2021 may exclude CFBanc to the extent that they are not yet integrated into our internal controls environment.

~~Table of Contents~~

Inherent Limitations on Effectiveness of Controls

Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives as specified above. Management does not expect, however, that our disclosure controls and procedures will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions, and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.

4139

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PART II. OTHER INFORMATION

Item 1.

LEGAL PROCEEDINGS

None

Item 1A.

RISK FACTORS

Not Applicable

Item 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

Item 3.

DEFAULTS UPON SENIOR SECURITIES

None

Item 4.

MINE SAFETY DISCLOSURES

Not Applicable

Item 5.

OTHER INFORMATION

On August 12, 2020, the Board of Directors of the Company approved an amendment and restatement of the Bylaws of the Company to, among other things, conform the deadlines for stockholder director nominations and new business proposals under the Bylaws, such that both are due in writing to the Corporate Secretary not less than 90 days nor more than 120 days in advance of the anniversary of the previous year’s annual meeting; provided, however, that if the date of the annual meeting is more than 30 days before or more than 60 days after the anniversary date, the stockholder notice must be received by the Corporate Secretary not later than 90 days prior to the annual meeting or, if later, 10 days following the day on which public disclosure of the date of the annual meeting is first made by the Company.None

Item 6.

EXHIBITS

Exhibit Number*
3.1	Amended and Restated Certificate of Incorporation of Broadway Financial Corporation effective as of April 1, ~~2021~~2022 (Exhibit 3.1 to Form 8-K filed by Registrant on April 5, 2021)
3.2	Bylaws of Registrant (Exhibit 3.2 to Form 8-K filed by Registrant on August 24, 2020)
~~10.1~~3.3	~~Employment Agreement, dated as~~Certificate of ~~December 29, 2017,~~Designations of Senior Non-Cumulative Perpetual Preferred Stock, Series C (Exhibit 3.1 to Form 8-K filed by ~~and among City First Bank of D.C., National Association, CFBanc Corporation and Brian Argrett. **.~~ Registrant on June 8, 2022)
~~10.2~~4.3	Registration Rights Agreement (Exhibit 10.2 to Form 8-K filed by Registrant on June 8, 2022)
City First Bank Deferred Compensation Plan for Brian Argrett.**10.3	Letter Agreement and Securities Purchase Agreement, date June 7, 2022 (Exhibit 10.1 to Form 8-K filed by Registrant on June 8, 2022)
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definitions Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

*	Exhibits followed by a parenthetical reference are incorporated by reference herein from the document filed by the Registrant with the SEC described therein. Except as otherwise indicated, the SEC File No. for each incorporated document is 000-27464.

**	Management contract or compensatory plan or arrangement

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: August ~~23, 2021~~15, 2022	By:	/s/ Brian Argrett
		Brian Argrett
		Chief Executive Officer

Date: August ~~23, 2021~~15, 2022	By:	/s/ Brenda J. Battey
		Brenda J. Battey
		Chief Financial Officer

4341

Delaware		95-4547287
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

~~5055~~4601 Wilshire Boulevard, Suite ~~500~~150 Los Angeles, California		~~90036~~90010
(Address of principal executive offices)		(Zip Code)

Title of each class:		Trading Symbol(s)		Name of each exchange on which registered:
Common Stock, par value $0.01 per share (including attached preferred stock purchase rights)		BYFC		~~The~~ Nasdaq ~~Stock~~Capital Market ~~LLC~~

Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

	Six Months Ended June 30,
	2021			2020
	(In thousands)
Cash flows from operating activities:
Net (loss) income	$	(2,753	)	$	183
Adjustments to reconcile net income to net cash used in operating activities:
Loan loss provision		81			29
Depreciation		345			115
Net amortization of deferred loan origination costs		964			136
Net amortization of premiums on available for sale securities		231			19
Amortization of investment in affordable housing limited partnership		26			53
Amortization of core deposit intangible		131			0
Director compensation expense-common stock		45			45
Accretion of premium on FHLB advances		(7	)		0
Stock-based compensation expense		169			179
Valuation allowance on deferred tax asset		370			0
ESOP compensation expense		47			32
Earnings on bank owned life insurance		(21	)		(23	)
Originations of loans receivable held for sale		0			(110,908	)
Proceeds from sales of loans receivable held for sale		0			60,997
Repayments on loans receivable held for sale		0			315
Gain on sale of loans receivable held for sale		0			(123	)
Change in assets and liabilities:
Net change in deferred taxes		(1,210	)		(271	)
Net change in accrued interest receivable		267			(68	)
Net change in other assets		(1,118	)		(349	)
Net change in advance payments by borrowers for taxes and insurance		310			43
Net change in accrued expenses and other liabilities		(447	)		442
Net cash used in operating activities		(2,570	)		(49,154	)

Cash flows from investing activities:
Cash acquired in merger		84,745			0
Net change in loans receivable held for investment		(29,749	)		23,265
Principal payments on available-for-sale securities		6,547			1,125
Purchase of available-for-sale securities		(4,073	)		0
Purchase of FHLB stock		(152	)		(670	)
Proceeds from redemption of FHLB stock		1,055			0
Purchase of office properties and equipment		(56	)		(328	)
Proceeds from disposals of office property and equipment		45			0
Net cash provided by investing activities		58,362			23,392

Cash flows from financing activities:
Net change in deposits		35,690			18,054
Net increase in securities sold under agreements to repurchase		10,613			0
Proceeds from sale of stock (net of costs)		30,837			0
Distributions to non-controlling interest		(165	)		0
Proceeds from FHLB advances		5,000			66,000
Repayments of FHLB advances		(22,535	)		(33,500	)
Stock cancelled for income tax withholding		(448	)		0
Repayments of junior subordinated debentures		(510	)		(510	)
Net cash provided by financing activities		58,482			50,044
Net change in cash and cash equivalents		114,274			24,282
Cash and cash equivalents at beginning of the period		96,109			15,566
Cash and cash equivalents at end of the period	$	210,383		$	39,848

Supplemental disclosures of cash flow information:
Cash paid for interest	$	1,803		$	3,290
Cash paid for income taxes		429			3
Assets acquired (liabilities assumed) in acquisition:
Securities available for sale, at fair value	$	149,975		$	0
Loans receivable		225,885			0
Accrued interest receivable		1,637			0
FHLB and FRB stock		1,061			0
Office property and equipment		6,953			0
Goodwill		25,966			0
Core deposit intangible		3,329			0
Other assets		2,290			0
Deposits		(353,722	)		0
FHLB advances		(3,166	)		0
Securities sold under agreements to repurchase		(59,945	)		0
Other borrowings		(14,000	)		0
Deferred taxes		(717	)		0
Accrued expenses and other liabilities		(4,063	)		0
Preferred stock		(3,000	)		0
Common stock		(63,257	)		0

	Three Months Ended						Six Months Ended
	June 30, 2021			June 30, 2020			June 30, 2021			June 30, 2020
	(Dollars in thousands except per share amounts)
Net interest income		$	5,821		$	5,173	$	11,011			$	10,331
Net income (loss)			723			476		(3,539	)			189

Basic earnings per share		$	0.01		$	0.01	$	(0.06	)		$	0.00
Diluted earnings per share		$	0.01		$	0.01	$	(0.06	)		$	0.00

	Common Shares Outstanding
	Voting Class A			Nonvoting Class B		Nonvoting Class C		Total Shares

Shares outstanding March 31, 2021:		19,142,498			0		8,756,396		27,898,894

Shares issued in merger		13,999,870			11,404,621		0		25,404,491
Shares exchanged post-merger		(681,300	)		0		681,300		0
Shares cancelled		(52,105	)		0		0		(52,105	)
Shares issued in private placements		11,221,921			0		7,252,079		18,474,000

Shares outstanding April 6, 2021:		43,630,884			11,404,621		16,689,775		71,725,280

	Six Months Ended June 30, 2020
	Real Estate
	Single family			Multi-family		Commercial real estate		Church			Construction			Commercial - other			SBA Loans		Consumer			Total
				(In thousands)
Beginning balance	$	312		$	2,319	$	133	$	362		$	48		$	7		$	0	$	1		$	3,182
Provision for (recapture of) loan losses		(4	)		105		36		(80	)		(26	)		(1	)		0		(1	)		29
Recoveries		4			0		0		-			0			0			0		0			4
Loans charged off		0			0		0		0			0			0			0		0			0
Ending balance	$	312		$	2,424	$	169	$	282		$	22		$	6		$	0	$	0		$	3,215

	Fair Value Measurement
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(In thousands)
At June 30, 2021:
Securities available-for-sale – federal agency mortgage-backed	$	0	$	84,256	$	0	$	84,256
Securities available-for-sale – federal agency debt		0		33,406		0		33,406
Municipal bonds		0		4,972		0		4,972
U. S. Treasuries		0		18,215		0		18,215
SBA pools		0		17,983		0		17,983

At December 31, 2020:
Securities available-for-sale – federal agency mortgage-backed	$	0	$	5,807	$	0	$	5,807
Securities available-for-sale – federal agency debt		0		2,872		0		2,872
Municipal bonds		0		2,019		0		2,019

	Outstanding							Exercisable
Grant Date	Number Outstanding		Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Aggregate Intrinsic Value		Number Outstanding		Weighted Average Exercise Price		Aggregate Intrinsic Value
February 24, 2016		450,000	4.65 years	$	1.62				450,000	$	1.62
		450,000	4.65 years	$	1.62	$	481,500		450,000	$	1.62	$	481,500

	Actual					Minimum Capital Requirements					Minimum Required to Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
June 30, 2021:
Community Bank Leverage Ratio ⁽¹⁾	$	97,639		10.10	%	$					$	82,171		8.50	%
December 31, 2020:
Tier 1 (Leverage)	$	46,565		9.54	%	$	19,530		4.00	%	$	24,413		5.00	%
Common Equity Tier 1	$	46,565		18.95	%	$	11,059		4.50	%	$	15,975		6.50	%
Tier 1	$	46,565		18.95	%	$	14,746		6.00	%	$	19,661		8.00	%
Total Capital	$	49,802		20.20	%	$	19,661		8.00	%	$	24,577		10.00	%